Aviva shares nosedive thanks to slashed dividend

Investors have fled from Aviva shares today after the insurer decided to cut its dividend by more than 25%.

by Michael Northcott
Last Updated: 19 Aug 2013

If you’re an income investor, today is not the day to buy Aviva. The insurer has announced a post-tax loss of £3bn in its full-year results, and simultaneously announced that shareholders will get 19p per share, a drop of more than a quarter  compared with 26p last year.

The firm’s chief executive, Mark Wilson, said that the losses were caused by write-downs pertaining to the sell-off of its US operation, which was agreed last year. He joined as chief in January after his predecessor Andrew Moss found himself the subject of a shareholder uprising – investors were miffed at his level of pay versus what they perceived to be poor performance.

Wilson said: ‘2012 was a year of transition at Aviva. [It] has many strengths to build on. My intention is that Aviva will be a simpler business with a robust balance sheet that delivers sustainable cash-flows and growth.’

So what is Aviva planning to do with the cash saved from a pared-down divi? It says that it will pay down some of the company’s huge debts as well as building up a cash pile to provide some security for the firm going forward. 

It insists that since beginning its new recovery plan in 2012, it has raised more than £2bn (partly by flogging the less profitable parts), and that shares have risen by more than a third on aggregate in that time.

So the insurance business isn't quite the license to print money that that bloke down the pub would have you believe...

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