Aviva’s dividend to fall by virtually a 3rd

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Aviva has introduced a dividend coverage that may result in it paying out virtually a 3rd lower than it did earlier than the Covid-19 disaster hit.

On Thursday, the insurance coverage group stated it was more likely to pay out a complete of 21p for 2020, rising in low to mid-single digits after that. Aviva paid out 30p for 2018 and had been on monitor to pay out 30.9p for 2019 earlier than it modified its plans following regulatory stress on the top of the primary coronavirus outbreak in April. It ended up paying out 15.5p for 2019.

Traders say that dividends are one of many principal causes to personal shares in insurance coverage corporations, and the choice to chop the payout will come as a blow to many shareholders.

The newest dividend “is sustainable and resilient in occasions of stress, and is roofed by the capital and money generated from the core markets of the UK, Eire and Canada”, the insurer stated in a press release.

Aviva stated that, as soon as it had paid down a few of its debt, it might return extra capital to shareholders if its solvency ratio — a measure of capital accessible as a proportion of the minimal required — is over 180 per cent. The measure stood at 195 per cent on the finish of September.

The insurer has lower its estimate of the price of Covid-19 claims in its basic insurance coverage enterprise from £165m to £100m. It stated the discount was all the way down to “decrease claims frequency throughout the third quarter reflecting decreased financial exercise”.

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