Aviva to offer goodwill payments over botched preference shares cancellation

Following its £450m preference shares cancellation u-turn, Aviva will offer a discretionary goodwill payment to affected shareholders.

The total cost of the scheme could be up to £14m.

Under 2,000 shareholders are affected, according to Aviva estimates.

Aviva first declared its intention to cancel the preference shares in its 8 March full year results announcement.

However, following investor outcry, on 23 March it cancelled its plans to pull the shares.

Anyone who sold their shares between 8 March and 22 March will be eligible for a payment, which is intended to return them to the ‘same financial position they would have been in had they sold their preference shares following the 23 March announcement’, according to an Aviva press release.

The offer of goodwill payment follows suggestions that Aviva may have flouted the Market Abuse Regulation (MAR) by saying it could cancel the securities shares.

In a letter to Treasury Select Committee chair Nicky Morgan, dated 28 March, FCA chief executive Andrew Bailey wrote that while the regulator was “not conducting a formal investigation”, it was “undertaking a review to establish whether there are circumstances that might require an investigation to be conducted.”

The shares will cease to count as regulatory capital in 2026, but Aviva has now vowed to work towards obtaining regulatory approval for the preference shares, or find a suitable substitute.

It confirmed that if it is unable to do so, it may need to reconsider this position and the market value of the preference shares closer to the time.

Aviva group chief executive Mark Wilson 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.   

“Preference shares remain an industry-wide issue and it is clear now that the best way forward is to seek a regulatory solution before the 2026 deadline when the shares no longer count as regulatory capital under Solvency II.

 “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.”