Aviva plans to cut dividend by a third and grow it from there

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Aviva PLC (LON:AV.) has unveiled a “sustainable and resilient” new dividend policy as the insurer simplifies its portfolio and builds excess capital in the long-term.

Having scrapped its shareholder returns in the teeth of the coronavirus crisis in April, the FTSE 100 life insurance giant said at the time of August’s half-year results that it was reviewing its payout policy, while also declaring a 6p per share ‘second interim dividend’ in respect of the 2019 financial year.

For the current year, boosted by recently agreed disposals of its Singaporean and Italian businesses for almost £2bn, and following exits from Indonesia and Hong Kong joint venture, the board has declared an interim dividend of 7p per share and said it expects to recommend a final dividend of 14p subject to a final decision in March.

The total payout of 21p per share for the year will be down by almost a third from the prior year.

“This level of dividend is sustainable and resilient in times of stress, and is covered by the capital and cash generated from the core markets of the UK, Ireland and Canada,” Aviva said in th results statement.

“Future dividends per share are expected to grow by low to mid-single digits over time.”

New chief executive Amanda Blanc, who took over in July, added: “As we simplify Aviva’s portfolio, we will deliver further value to shareholders by returning excess capital above 180% solvency cover ratio, once our debt leverage target ratio has been reached.”

During the third quarter of 2020, the group’s Solvency II cover ratio inched up to 195% from 194% at the half-year stage.

UK & Ireland life new business sales were up 40%, savings and retirement net fund flows increased 20%, while Aviva Investors saw third party net fund inflows of £1.2bn.

On the outlook, the group said the trading impacts from recent lockdowns remain uncertain but no significant increase in net business interruption claims is expected.

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