Shares of Aviva PLC (LON: AV.) are trading over 2% in the red today after the insurance firm said it will cut the dividend by a third in order to achieve higher sustainability.
Aviva reported that sales in its UK & Ireland life new business rose 40%, while savings and retirement net fund flows jumped 20%.
“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,” CEO Amanda Blanc said.
Aviva said today it will pay an interim dividend of 7p per share and recommended a final dividend of 14p, which should get a final confirmation in March. This would translate into a final dividend payout of 21p, which is lower compared to a year ago.
“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 the statement.
“Future dividends per share are expected to grow by low to mid-single digits over time.”
The balance sheet received a major boost after the company’s Singaporean and Italian units were offloaded for almost £2 billion.
On the forward-looking guidance, Aviva said that trading activity remains impacted by fresh lockdown measures but without major interruptions so far.
Aviva share price is now trading at 324p, or 1.2% lower on the day after travelling to 320.1.
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