U-turn follows criticism from investors and enquiries from the FCA.
Aviva has ditched its plans to cancel its preference shares, citing “feedback and criticism” from its investors.
The provider originally outlined plans to cancel £450m of its preference shares when it announced its full year results on 8 March this year.
The decision was met with outrage and criticism from investors.
Criticism
The Times reported earlier this week that a group made up of M&G Prudential, Invesco, GAM, Blackrock, Legal & General and Eden Tree had met with Aviva chairman Sir Adrian Montague on 20 March to demand that the insurer backed down from the proposal.
The article detailed that the reason behind the criticism was that owners of the shares, which include pensioners and charities, did not know they could be cancelled.
In addition, a report from the The Financial Times stated that MPs had called for the Financial Conduct Authority (FCA) to intervene after investors said they were considering legal action against the company.
According to Reuters, the FCA said in response on Wednesday 21 March that it “has already been making active enquiries into the issue” and asked Aviva to explain the legal basis for its decision to cancel the preference shares.
U-turn
Following this, Aviva today (23 March) made its U-turn and said it had decided not to cancel its preference shares.
The provider stated that under current regulation the preference shares will no longer count as regulatory capital in 2026 and revealed it would “work towards obtaining regulatory approval for the preference shares, or a suitable substitute, to qualify as capital from 2026 onwards”.
In a statement the insurer continued: “If as we approach 2026 Aviva needs to reconsider this position, it will do so after taking into account the fair market value of the preference shares at that time.”
Trust
Mark Wilson, group chief executive officer of Aviva, said: “I am very aware that Aviva is in a position of trust with our customers and investors. To maintain that trust it is critical that we listen to and act on feedback.
“The reputation of Aviva, and the trust people have in us, is paramount. Our announcement today means that preference shareholders can rest secure in their holdings.”
He added: “The board and I have a duty to consider not just the financial implications of our actions.
“We must consider the impact to Aviva’s wider reputation. I hope our decision today goes some way to restoring that trust.”
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