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Aviva to return capital to shareholders as FY'17 profit more than doubles YOY

Aviva Plc unveiled plans to return more than £500 million of capital to shareholders as it reported a significant increase in yearly profit.

CEO Mark Wilson said the company expects to deploy £2 billion in excess capital in 2018, of which £900 million will be used to pay down debt and about £600 million will be earmarked for bolt-on acquisitions. The remainder, expected to be in excess of £500 million, will be in the form of capital returns for shareholders.

CFO Thomas Stoddard indicated that the capital return could include a cancellation of preference shares, which carry high coupons, at par value, noting that such shares are not tax-deductible and will not count as regulatory capital from 2026.

The U.K. insurance group reported full-year 2017 profit attributable to equity holders of nearly £1.50 billion under International Financial Reporting Standards, up from £703 million in 2016. EPS for the year stood at 34.6 pence, compared to the year-ago 15.1 pence.

Gross written premiums rose on a yearly basis to £27.61 billion from £25.44 billion. Premiums written net of reinsurance increased to £25.38 billion from £23.08 billion.

Net earned premiums came in at £25.22 billion, up from £22.87 billion a year earlier. Net investment income declined over the period to £22.07 billion from £30.26 billion.

Claims and benefits paid net of recoveries from reinsurers widened year over year to £24.11 billion from £23.78 billion.

The group's value of new business on an adjusted Solvency II basis rose 25% to £1.24 billion from £992 million a year earlier, driven by growth of new business in the U.K., Europe and Asia.

The general insurance combined operating ratio reached 96.6% in 2017, compared to the year-ago 100.1%.

Aviva's estimated Solvency II surplus amounted to £12.2 billion in 2017, representing a cover ratio of 198%, compared to a surplus of £11.3 billion and cover ratio of 189% for the previous year.

The company's board proposed a final dividend of 19.0 pence per share for 2017, up from 15.88 pence per share a year ago. The final dividend takes the full-year 2017 dividend to 27.4 pence per share, up 18% from 23.30 pence per share paid in respect of 2016. The dividend is in line with Aviva's 2017 dividend payout ratio target of 50% of operating EPS.