Aviva is to offer a discretionary goodwill payment to shareholders who sold preference shares in the period from 8-22 March inclusive, as it seeks to make amends for the debacle around a controversial share buy-back it later dropped.
Last month Aviva U-turned on plans to cancel £450m worth of preference shares after "strong feedback and criticism" about buying back the stock from investors at below market value.
When the shares were issued, Aviva made it clear it had the right to buy them back at face value, even if they were trading at a price considerably above that. In the company’s recent results statement, it said it was considering taking this action.
This is because under current regulation the preference shares will no longer count as regulatory capital in 2026.
Today (30 May) Aviva has announced that any shareholders who sold preference shares between 8 and 22 March at a price lower than the share price on 23 March, when Aviva announced it was dropping its controversial share buy-back plan, would receive a goodwill payment.
This payment is intended to put those shareholders back in the same position they would have been in had they sold them following the 23 March announcement.
Aviva said around 2,000 investors are affected and will receive the payment, at a total cost to the company of £14m.
The Financial Conduct Authority (FCA) is looking into the way Aviva communicated its plans to cancel preference shares that would have left some investors out of pocket.
Referring to the company’s original plans and its decision to take a different tack, following negative feedback, Mark Wilson, group CEO said: “Our announcement on 23 March meant that Aviva’s preference shareholders could rest secure in their holdings. However, we recognise that whilst 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.”
He added: “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.”
KPMG have been appointed as an independent administrator, to handle the goodwill payment process, which is due to be ready by 31 July this year. Aviva said that eligible shareholders would have up to six months to make a claim from this date.