Aviva to postpone dividend payment following calls from regulators

Lauren Mason
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Aviva said it would reconsider paying a dividend in Q4
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Aviva said it would reconsider paying a dividend in Q4

Aviva has told shareholders it will not pay them a dividend in June 2020, instead potentially delaying it until the fourth quarter of the year, as the coronavirus crisis continues to weigh on companies.

The insurer and asset manager said its board had agreed to withdraw its recommendation to pay its 2019 final dividend to shareholders in June 2020, instead expecting to reconsiderany distribution to investors in Q4.

Aviva said the decision had been taken in response to urgings from regulators including EIOPA and the Prudential Regulation Authority that insurers should reconsider their dividend payments.

In light of the significant uncertainties presented by covid-19, the board agrees with our regulators that it is prudent to suspend dividend payments at this time."

"In light of the significant uncertainties presented by covid-19, the board agrees with our regulators that it is prudent to suspend dividend payments at this time," the company said.

Aviva insisted it remained "well capitalised with strong liquidity," noting that the savings from not paying a dividend would increase the group's estimated capital ratio by around 7% to 182%.

"It remains too early to quantify the impact of covid-19 on claims expenses in our life and general insurance businesses, and the potential effect of capital markets and economic trends on our results," Aviva said.

"Given the change in the economic outlook, we are reviewing all material discretionary and project expenditure.  We intend to provide an operational update for investors in the second half of May."

Further asset management dividend cuts
The news comes a day after US banking giant JP Morgan Chase, Europe's largest asset management firm Amundi and South African banking & wealth management firm Investec all proposed - or considered - suspending their dividends for the first time in their respective histories, in the event that a sharp recession is triggered by the coronavirus pandemic. 

Amundi has proposed suspending its 2019 dividend payment, according to a report from the Financial Times, in response to calls from the European Central Bank (ECB) for banks not to pay dividends for the financial years 2019 and 2020 until at least 1 October 2020.

The proposal will be raised in the company's annual general meeting on 12 May and put to a shareholder vote, Investment Week understands.

Meanwhile, JPM's CEO Jamie Dimon has warned in a letter to shareholders that, if the US economy contracts by more than 35% and unemployment reaches 14% as a result of the pandemic, the bank's board will suspend its dividends.

This would be the first suspension in the bank's history.

However, Dimon said this was "unlikely", and that any suspensions would be made out of "extreme prudence", according to the FT.

The US's eight largest banks have already suspended their share buybacks, which account for more than 60% of their pay-outs to shareholders.

In the UK, the five largest banks have formally agreed to withhold their 2019 dividends, following urges to do so from the Bank of England's Prudential Regulation Authority (PRA).

Investec has issued  a statement "aknowledging" the guidance published by both the PRA and the Prudential Authority of the South African Reserve Bank, and said it will "advise shareholders accordingly in due course."

The firm stated: "[We] recognise the importance of dividends to the group's owners, the significant challenges currently faced by businesses and individuals and the need to support the wider economy amid the Covid-19 pandemic, as well as the importance of ensuring the stability of the Group in the short, medium and long term. 

"The group remains highly liquid and well capitalised."

This article was first published by Investment Week