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LONDON (Reuters) - British insurer Aviva generated forecast-beating annual profit, boosted by growth in general insurance and asset management, and said more of its growing cash pile would be handed back to shareholders in 2017, sending its stock higher.
Aviva, which traces its roots to the sale of fire insurance in 1696, on Thursday posted a 12 percent increase in operating profit to 3 billion pounds ($3.65 billion), driving strong cash generation and improving its capital position.
Offering both life and general insurance such as motor and home cover, Aviva is less exposed than more specialized motor insurers Admiral and Direct Line to a government change to the calculation of lump sum payments in personal injury claims.
"Aviva's results are simple and clear cut: more operating profit, more capital, more cash, more dividend. And there is more to come," Chief Executive Mark Wilson said.
On a call with journalists, he said the company would look to use some of the cash to pay down high-cost debt, and was leaning toward doing a share buyback, although no decision had yet been reached.
Aviva's share price rose 7 percent to 546p by 0940 GMT, the top gainer on the FTSE 100 index.
The company said its performance was helped by a strong rise in cash remittances from its various business units, up 20 percent to 1.8 billion pounds, helped by a 15 percent rise in general insurance net written premiums to 8.2 billion pounds.
Life insurance operating profit increased 8 percent to 2.6 billion pounds, helped by growth in protection, pensions and individual annuities in the UK, protection sales and currency effects in Europe.
Fund management operating profit, meanwhile, rose 30 percent to 138 million pounds, boosted by a rise in group assets under management to 450 billion pounds, an increase in revenue margin and improved cost to income ratio.
The company said it would pay a total dividend for the year of 23.3 pence a share, up 12 percent.
Strong cash generation of 3.5 billion pounds helped the firm's Solvency II capital ratio, the rainy day cash buffer to any market shock, rise to 189 percent from 180 percent in 2015.
That gave a surplus of 11.3 billion pounds, up from 9.7 billion pounds last year, and as it is above the firm's flagged range of 150-180 percent, Aviva said it was "actively planning to return additional capital to shareholders and reduce hybrid debt in 2017".
Ben Wallace, fund manager at Henderson, an investor in Aviva, said the firm's broad geographical and product spread helps its capital position, a positive for investors.
Additional reporting by Carolyn Cohn; Editing by Keith Weir