Aviva shares debacle to cost insurer £14 million

REVOLT: Perth-based firm made a U-turn on its threat to cancel preference shares

Insurance giant Aviva is to pay millions of pounds to compensate investors who sold during a dispute over preference shares.

The group, which has a large base at Pitheavlis, Perth, announced it planned to cancel £450 million of preference shares, which pay high fixed dividends, on March 8.

However, the company back-tracked on the plans on March 23 following strong criticism from investors and the Financial Conduct Authority (FCA).

In the latest twist in the debacle, Aviva is to make around £14m of goodwill payments available to people who lost money by selling the company’s preference shares between March 8 and 22. As many as 2,000 private investors and institutions are in line for the payments which Aviva hopes will restore trust.

Mark Wilson, group chief executive officer of Aviva, said yesterday: “Our announcement on March 23 meant that Aviva’s preference shareholders could rest secure in their holdings.

“However, we recognise that while we were considering our options for the preference shares this caused uncertainty and led some investors to sell their shares.

“The board and I want to do the right thing and make this goodwill payment.

“Preference shares remain an industry-wide issue and it is clear now that the best way forward is to seek a regulatory solution before the 2026 deadline when the shares no longer count as regulatory capital. We accept that whatever action we take, we will continue to hear divergent views on this topic from various stakeholders.

“However, together with our previous announcement not to proceed with the cancellation of the preference shares, we hope this goodwill payment goes some way to restoring trust in Aviva.”

Aviva said it was “engaging” with the FCA in its probe into the market for preference shares.

The City watchdog has warned companies about how they treat preference shares following its spat with the insurance firm.

Aviva has appointed KPMG as an independent administrator to handle the goodwill payment process.

business@thecourier.co.uk

Top: Aviva’s headquarters in Perth. Above: Group chief executive officer Mark Wilson.