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Aviva pays divi as Covid claims hit H1 profits; Cuts focus on Asia, Europe

By Frank Prenesti

Date: Thursday 06 Aug 2020

(Sharecast News) - Insurer Aviva reinstated its dividend but said it would review its payout policy as half-year profit fell on coronavirus-related and weather claims and said it would reduce its focus on Asia and Europe.
The company on Thursday declared a 6p-a-share dividend. Operating profit fell to £1.25bn from £1.38bn. Aviva took a £165m hit from Covid-19 on general insurance claims.

New chief executive Amanda Blanc said the company would now focus on "building and extending our leadership in the UK, Ireland and Canada".

She added that "where we cannot meet our strategic objectives, we will be decisive and we will withdraw capital", in reference to Europe and Asia.

The company also warned that volatile markets and economic uncertainty would persist in the near term "and may mean that growth and profitability targets will be harder to deliver".

"While the board continues to monitor the impact of Covid-19 and the economic outlook carefully and with appropriate prudence, we have decided to take the opportunity to review our longer term dividend policy, in light of our strategic priorities and the future shape of the group, with the objective of a sustainable pay-out and lower leverage," Aviva said in a statement.

"As protective measures are eased and government support withdrawn, economic headwinds and capital market volatility are likely to persist. As a result, any recovery in customer activity is likely to be gradual and we will continue to be prudent in managing our businesses and capital resources."

Blanc, who took over at the helm last month, said Aviva would update shareholders on its dividend plans, including the 2019 final payout, in the fourth quarter.

Hargreaves Lansdown analyst Nicholas Hyett said Blanc's restructure plans were "pretty much the same playbook Aviva's been working from for years. Blanc will have some work to do at the full years to show why her plan will succeed where others have struggled".

"The good news for shareholders is that dividends are back, something analysts hadn't expected, but with a policy review coming up at the end of the year, and an ambition to cut debt, future payments are likely to be lower."

Russ Mould, investment director at AJ Bell said the decision to maintain an approach "which sees Aviva offer everything from life policies to pet insurance is interesting as (Blanc's) predecessor Maurice Tulloch attracted ire from shareholders over his failure to consider a break up of these different lines of business".

"Some confidence is also signalled in the future as Aviva resumes dividends - albeit on a modest scale ahead of a decision at the end of the year which it seems is likely to involve rebasing the dividend."

"This could make the payout more sustainable in the long term and if the company does end up selling off assets there could even be the prospect of special dividends funded by the proceeds."

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