LONDON (Reuters) - British insurer Aviva on Thursday said it planned to change the way it pays dividends as part of efforts to cut debt, taking the shine off in-line full-year earnings and sending its shares lower.
Aviva, which sells everything from life to car insurance, said it would move from a fixed payout ratio to a progressive dividend linked to underlying growth, giving the board more flexibility to make adjustments.
The results are the first under new Chief Executive Maurice Tulloch, who took up his job this week following the ouster of former boss Mark Wilson in October. He faces investor pressure to improve returns quickly.
“We have strong foundations but we are only scratching the surface of our full potential,” Tulloch said in a statement.
On a call with journalists, the CEO said there was a lot of low-hanging fruit in terms of areas of the company’s operations that could be streamlined to improve underlying performance, including its product range and distribution.
Tulloch declined to comment on the potential for a more aggressive overhaul of the group, which some analysts and investors have suggested could include sale of overseas operations or an exit from certain lines of business.
Chairman Adrian Montague said the group’s new progressive dividend policy would see the dividend maintained or grown over time depending on business performance and growth prospects.
Aviva’s dividend remains a key part of its attraction for fund managers focussed on income, so any move to loosen the rules would likely be taken negatively.
Aviva’s shares were down more than 3 percent at 0940 GMT, among the biggest fallers on the FTSE 100 index.
The company’s operating earnings per share for the year to end-December rose 7 percent to 58.4 pence a share.
UBS analyst Colm Kelly said these were buoyed by share buybacks that would be unlikely to be repeated in the year ahead.
In a note to clients, he said he expected “a slight negative reaction due to dividend policy change and EPS outlook”.
Strength in the company’s key UK market, particularly in life insurance, helped operating profit to rise 2 percent to 3.11 billion pounds ($4.09 billion).
But Chief Financial Officer Tom Stoddard said the outlook was more muted than a year earlier, ahead of Britain’s exit from the European Union, slated for end-March.
($1 = 0.7598 pounds)
Reporting by Simon Jessop, editing by Sinead Cruise and Jane Merriman