Aviva has announced a plan to buy back £600m worth of its ordinary shares.
The company said with the dividend at 5.2 per cent and likely to grow further, it considers a buyback of its shares to be a prudent use of its excess capital.
Aviva said it has £2bn of excess capital, with £900m marked for debt reduction and £500m for small acquisitions.
The decision of Aviva to buyback a portion of its ordinary shares comes in light of the company aborting a plan to buy back its preference shares.
As FTAdviser previously reported, Aviva had planned to buy back some of its “irredeemable” preference shares at par value, despite the instruments trading at a premium.
Aviva reversed that decision citing “criticism” it had received, and subsequently announced it will pay £14m of compensation to owners of the preference shares who may have sold the instruments in anticipation they would be compulsorily purchased at a lower price.
The FCA subsequently warned firms about how they communicate the terms and conditions of preference shares, and in particular the terms under which the instruments can be repurchased.
Mark Wilson, chief executive of Aviva, said the plan to deploy the excess capital will allow the company to improve earnings strengthen cash flow and reduce debt levels.
David.Thorpe@ft.com
