British insurer Aviva, which raised a ruckus after declaring it has the ability to cancel its preference shares at par value, has backpedalled.
Admitting it has received strong criticism following the controversial March 08 announcement, Aviva has now “decided to take no action to cancel its preference shares,” referring to preference shares issued by Aviva plc and General Accident plc. In a statement issued this morning, Aviva said it has listened.
“Under current regulation the preference shares will no longer count as regulatory capital in 2026,” read the statement. “Aviva will work towards obtaining regulatory approval for the preference shares, or a suitable substitute, to qualify as capital from 2026 onwards. 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.”
Explaining how the review of the preference shares came about in the first place, Aviva said it was initiated as a result of the firm’s duty to examine what is right for the business while balancing the interests of both ordinary and preference shareholders.
“Aviva needed to address the issue of the preference shares given regulatory capital considerations and their cost,” it stated.
But following the backlash, the insurer will not be making good on its ‘threat’ – at least that’s how some have termed the earlier pronouncement – to cancel the shares.
Insurance Business readers, for instance, have expressed their disapproval, with one commenter saying Aviva has “completely destroyed trust” and that it will never be trusted if it goes ahead with the cancellation. The plan has been called a scam and a move to swindle the public.
“What does it profit a man to gain the world, but lose his soul,” read one comment. “What short-sighted fool put this forward at Aviva. The company will be stigmatised and tainted for many years if Aviva proceeds.”
And proceed it shall not.
“I am very aware that Aviva is in a position of trust with our customers and investors,” said group chief executive Mark Wilson in today’s statement. “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.
“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.”
