Questions will be asked at AGM, predict analysts

Analysts have expressed doubts over whether Norwich Union can pay its 2009 dividend.

“Norwich Union have put the dividend as a central strategy going forward, so there is a stand-off of what the company pledges it will do, and what the City thinks will happen,” said Duncan Hall, analyst for FinnCap.

“What people will be questioning at the annual general meeting is whether [maintaining the dividend] will be realistic. Does Norwich Union have £900m of free cashflow to pay the dividend at the rate that it did in 2008? It’s a lot of money.”

A spokesman for Norwich Union said: “We announced in our preliminary results that we would maintain the dividend for 2008 as planned at 33p. We haven’t announced any changes to our dividend policy [subsequently], but we wouldn’t speculate on the 2009 dividend. That decision is some way off and for the board to consider.”

But Hall questioned whether Norwich Union would be able to maintain the dividend for 2009.

“Old Mutual cut theirs, Pru raised theirs, Legal & General cut theirs and Aviva seems to coasting ahead.

“It seems the line the company took is ‘there are lots of things we can do before we need to panic about rights issues and the dividend’, so they are sticking to their guns,” he said.

Norwich Union has also come under fire over the risks in its asset portfolio.

Credit rating agency Moody’s has put the insurer under review for a downgrade pending an investigation into its investment strategy.

“We require additional information on the asset portfolio,” said Paul Oates, an analyst at Moody’s.

“We want to look into the equity exposures, the corporate mortgage portfolio exposures and understand the level of provisions the company has made, how conservative they are and what

the likely impact would be on capital levels if there is further deterioration of these asset classes.”

He added: “They have been hedging and have some protection, but we want to understand how that feeds through to their capital position.”

Oates said Moody’s was likely to announce the outcome of its investigation within 90 days.

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