Aviva’s bold plan to return £5BN to its shareholders

AVIVA is drawing up plans to return up to £5billion to shareholders as boss Amanda Blanc prepares to unveil her new growth strategy for the pensions giant.

The board of the FTSE 100 insurer is finalising a blueprint for the bumper payout which will get the sign-off next month.

It is understood the preferred option is to pay a special dividend along with a ‘share consolidation’ plan, which will reduce the number of shares in the market to keep the price intact.

Aviva is buying back £1billion of shares and has said it will return at least another £3billion, potentially through a special dividend.

But analysts are now expecting the total payout to be closer to £5billion. Aviva declined to comment.

Barrie Cornes, analyst at Panmure Gordon, said: ‘We think Aviva could do a £4billion capital return in addition to the £1 billion buyback.

We would prefer to see a special dividend.’

Blanc, 55, will also present her growth blueprint to the market. It will include a plan to acquire a digital advice business to guide customers nearing the end of their investment and pension products. The insurer loses about £7billion a year from customers switching away as their products expire.

The bumper payout and growth plans, to be announced alongside the insurer’s full-year results on March 2, will be a boost for longsuffering investors after a debacle over preference shares.

In 2020, the Financial Conduct Authority – previously by Andrew Bailey, now Bank of England governor – reprimanded Aviva for ‘potentially misleading’ the market over its share buyback programme. Aviva subsequently paid out £14 million in compensation to investors who sold their preference shares at a loss.

Blanc came on board as chief executive in July 2020 and quickly set about selling off overseas offices to focus the business on the UK, Ireland, and Canada, while keeping a few outposts in Asia.

But just a year later, activist investor Cevian took a 5 per cent stake and called for Aviva to return £5billion to shareholders by the end of 2022 following the sale of overseas businesses. It also pushed for further cost cuts of at least £500 million by 2023.

Shares in the insurer have jumped 26 per cent over the past year to 432p, giving it a market value of £17 billion.

Blanc is expected to discuss growth plans in the bulk annuity market, helping companies to secure future pension payouts to their members, and grow its workplace pensions offer.