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Aviva scraps plan to cancel preference shares

Aviva has abandoned its plan to cancel high yield preference shares after a backlash from retail investors, fund managers and MPs.

Aviva scraps plan to cancel preference shares

Update: Aviva has abandoned its plan to cancel its high yielding preference shares amid investor anger. 

The stunning U-turn follows a backlash against the plan, with MPs demanding the Financial Conduct Authority step in to resolve it. 

In an announcement posted on the London Stock Exchange this morning, Aviva chief executive Mark Wilson said: 'I am very aware that Aviva is in a position of trust with our customers and investors. 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.

He added: '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.' 

The shares surged on the news. Aviva 8.375% preference shares were up 15.6% at 155.5p while the 8.75% shares were up 17.3% at 162.5p.

General Accident preference shares, which had also been threatened by the cancellation, were equally buoyant. General Accident 8.875% preference shares jumped 24.3% to 161p while the 7.875% shares were up 14.1% at 142p.

They have now recovered most of the ground lost when Aviva stunned investors earlier this month by signalling it could cancel the shares, sending their values plummeting and sparking anger among investors.

The shares carry high fixed dividends, which had led to them trading on hefty premiums, but they were subjected to a heavy sell-off on Aviva's threat to cancel them at par.

Retail investors, fund managers and MPs had protested against the move, pointing to their marketing as 'irredeemable', but Aviva until now had stood firm on its right to cancel them.

In an update last week, it said the shares' irredeemable status did not prevent them being cancelled through a 'reduction of capital', which was 'a different mechanism under law to redemption'.

While preference shareholders would have been given a vote on any cancellation, their voice would have been drowned out by ordinary shareholders.

In the case of the General Accident preference shares, issued by Aviva's legacy car insurer, Aviva, as the sole ordinary shareholder, would have been able to wave through the plans.

Aviva preference shares would have meanwhile carried four votes versus one for every ordinary shares, but the more than four billion ordinary shares in issue versus 200,000 preference shares meant ordinary shareholders would have had the final say.

Preference shareholders had feared that ordinary shareholders would overwhelmingly back the plans, lured by the prospect of bigger payouts to which Aviva had explicitly linked its move.

Aviva had said cancellation of the shares was 'one of a number of options Aviva is considering for the deployment of £2 billion surplus capital in 2018'.

But while its move faced staunch opposition from preference shareholders, major ordinary shareholders also opposed the move.

Fund groups M&G, Invesco, BlackRock, Legal & General, Eden Tree and GAM this week met Aviva chairman Adrian Montague to lobby him against the move. Between them the fund groups control 15% of the ordinary shares and 29% of the preference shares.

They welcomed today's move. 'The announcement by Aviva today goes a long way towards addressing our concerns and we thank Sir Adrian and the board for engaging constructively with us and being willing to reverse their course,' they said.

'Having taken this step we would encourage Aviva, and other companies with similar instruments, to take whatever steps necessary to modernise their articles of association in a way that would reflect both the group’s intentions going forward, and the true irredeemable nature of the instruments as set out in the initial offering documentation and subsequent investor communications.'

In this morning's announcement, Aviva said it would work on an alternative solution when the preference shares no longer count as regulatory capital in 2026. 

'Aviva will work towards obtaining regulatory approval for the preference shares, or a suitable substitute, to qualify as capital from 2026 onwards,' it said.

'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.

'Aviva is in a strong financial position and still plans to deploy £3 billion of excess cash in 2018 and 2019 to reduce hybrid debt, fund bolt-on acquisitions and buy back ordinary shares.' 

22 comments so far. Why not have your say?

Peter Clery

Mar 23, 2018 at 10:01

The market price is yet to be restored to the pre announcement level. So they cannot buy in the shares even if they were minded to do so.

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andrew moffat

Mar 23, 2018 at 10:11

Mark Wilson should resign or be dismissed. We also need to discover what the CFO's role in this calamity was. This controversy should never have occurred in the first place and suggests ill-judgement in the extreme.

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Alan Rodger via mobile

Mar 23, 2018 at 11:28

Having observed this Pref issue over the last week or so. A number of things are clear.

The Media misinterpreted and misreported this from the start. I watched the Aviva Results presentation, it was open and honest of the CEO and CFO to mention the Pref cancellation as a 'consideration' but unfortunately the British media, ego driven and desperate for manipulated headlines started to drive a story NOT based on FACT but made out of context and on possibility alone.

Aviva have one of the best CEO's available.

One just needs to look at the phrase 'trade wars' rather than the word 'renegotiating' as am example of the destruction the media are causing on Global Markets by inflammatory language. If you can't report reality, fact and accuracy then keep quiet. It's time the media were brought to account. Perhaps they should pay up for share losses when they drive the negativity and mindset of the herd mentality?!

Aviva , and it's board are clearly looking over all the financial possibilities as any well run business should.

The previous CEO was useless as a leader and almost ruined a solid company.

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Colin Boylett

Mar 23, 2018 at 11:37

I agree with Andrew. If anybody was brave enough to actually BUY the Prefs. good luck to them! I sent some very snotty tweets to Aviva and then re-tweeted them to ensure that they went out to 2300 individuals Some of these re-tweeted. I doubt that this made much difference overall, but it is important to remember that you can multiply complaints quickly in this way. Unlike Facebook, you don't have to donate any data. I suspect that Mark Taber's intervention was significant and thank him for his involvement.

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andrew moffat

Mar 23, 2018 at 11:58

Alan Roger, I understand your reasoning but let us not forget that Aviva then compounded their error by making further announcements on their website. All this nonsense about cancellation as opposed to 'redemption' and the reference to, and reliance upon, the 2006 Companies Act was highly damaging. We are discussing the investments of old ladies, here, not those of sharp and unprincipled lawyers, looking to stretch the interpretation of the law.

Aviva should have discussed this matter, privately, with institutional shareholders of its Preference class and with others before making such an ill-considered series of announcements. It failed to do so and has now had to make a humiliating U turn, after much serious damage to its reputation and that of the Board. We are discussing moral compass and those who sold in the market after the initial statements have suffered a financial loss. Will the Board make good such losses?

The CFO and/or the CEO should go. I do not own the Preference shares, so I state this with a position of financial neutrality, even although the ordinary share class would have benefited.

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Colin Boylett

Mar 23, 2018 at 12:06

I actually 'lost' around £30,000 as a result of Aviva's idiocy. Even though the price has recovered a lot there is now likely to be a 'lack of trust, dealing with a spiv company' reverse premium allocated, not just to the Aviva & GA prefs. but to others because of the (however remote) chance that others will follow. I intend to see how things settle down and may well decide to bill Aviva in due course. The difficulty is that, in order to claim, you normally need to quantify any loss and you cannot really do this unless you sell the securities to crystallise it.

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Rick Dale

Mar 23, 2018 at 16:43

@Alan There was a clear and sudden shift in policy by Aviva on the prefs. Previously, they had asked the AGM annually to approve buybacks at up to 105% of market price. Then they thought they had found a loophole. But among the considerations they should have taken into account was the damage this would do to their reputation, to trust in the company, to their own investment funds and to the investment funds of their ordinary shareholders, many of whom would be holding prefs, and to the preference shareholders themselves, to whom they owe a duty of care also.

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Michael Loveridge

Mar 23, 2018 at 17:05

Well I'm just deeply grateful to Aviva for giving me the quickest and easiest 22% profit I've ever had!

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paul ekstein

Mar 23, 2018 at 17:19

The "save Wilson campaign" has begun. To suggest that anyone who has invested in pref shares should understand the length that unprincipled and deeply unethical Aviva directors would stoop to "steal" shares should even stretch the imagination of the most dedicated free marketeer. Institutional investors had no inkling and the way they turned on Wilson was heartening . Ecclesiastical Insurance are to be commended for getting the ball rolling. My view of Wilson after watching several meetings with analysts is that he is rather smug His acorns turning into oak tress metaphor is both trite and patronising. The amount of sponsorship poured into sports sponsorship by Aviva dwarfs what it would have cost to deal with pref share investors in a reasonable fashion. Aviva needs to grow it's business and Wilson does not appear up to that task.

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Cynical Investor

Mar 23, 2018 at 17:20

An incompetent proposal which should mean a few Vacant Executive Desks.

Wonder how many Holders took fright and sold at the diminished value?

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richard tomkin

Mar 23, 2018 at 20:22

This decision has nothing to do with with "trust" or "reputation",with all due respect to Aviva.The fact is that cancellation of these shares would have been illegal under company law.

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Michael Mason-Mahon

Mar 24, 2018 at 08:22

Nowhere in this statement produced by Aviva plc today, has the Chairman of Aviva plc, Sir Adrian Montague has NOT offered any APOLOGIES or said SORRY concerning the devastating financial impact of Aviva's behaviour has had on many individuals and companies holding preference shares, not just in Aviva in many other companies to.

Let all shareholders, stakeholders and customers of Aviva plc, join together and hold Sir Adrian Montague Chairman of Aviva plc responsible for the serious damage caused to the shareholders, stakeholders and customers and the very serious damage caused to Aviva plc's reputation.

As a customer and shareholder of Aviva plc, I urge my fellow shareholders, stakeholders and customers to to email Sir Adrian Montague directly at, and inform him that you do NOT want him to be the Chairman of Aviva plc, under any circumstances.

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Mar 24, 2018 at 10:34

Mark Wilson has done a fantastic job turning round a company which was mired in scandal and burning shareholders money. He has a duty to all shareholders of managing the company in a manner which maximises returns. As such he must consider all options which deliver that fiduciary duty.

The possibility of redeeming preference shares should have been considered as one of a number of methods of deploying excess capital efficiently. He did the right thing in mentioning that possibility in his report and thereby solicited opinions from shareholders for whom he is the custodian. This surely is the way things should work. We do not expect CEO's to take financial decisions based on their oersonal position on an issue. It is then up to the owners of the company to express their preference at the AGM. If they decide to forgo profit for principal, that is their right.

We seem to be vilifying a competent management team for performing their duties to shareholders in a correct manner. The final choice would have been with the shareholders. That is the way comercial organisations work.

Wrapping the argument in the emotional rhetoric of the preference shares being held by widows and orphans conveniently ignores the fact that the ordinary shares are also held by the self-same widows and orphans. In maintaining additional "perpetual" income to one group, you deprive the other group of ordinary income.

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Colin Boylett

Mar 24, 2018 at 10:59

I think you have ignored the main objection. Holders of the prefs.had been ‘allowed’ to believe that they were ‘irredeemable’, not least because they were listed this way with no cancellation caveat.

If the ‘fantastic’ management team had been that, they would have tested the waters BEFORE making any announcement. This could have been done quietly without the undoubted reputational damage. Because the announcement has driven down prices on ALL prefs., and some holders may have sold as a result of Wilson’s actions, Aviva now leave themselves open to compensation claims.

Is that ‘fantastic’? I think not. As another contributor has pointed out, this is a ‘Ratner moment’, perceived by some as ‘we invite people to pay for shares, investments etc. that we know have rubbish promises attached on the assumption that they won’t find out that there is something in the small print that we can later use to our advantage. Our products are crap and our customers are stupid’.

Trust is everything in financial services because investments are, by and large, bought for the future.

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Mar 24, 2018 at 11:36

Colin Boylett

I would have thought that "quietly" announcing redeeming the preference shares would not be an ethical option. Discussing that with large investors to solicit opinions could be considered imparting inside information. Trust is everything as you say. Rather have a manager who is open and transparent about the options.

However if you believe that the management has acted in a way which betrays trust, then you can vote accordingly at the next AGM....presuming you are a shareholder. I do not and most certainly they will get my backing.

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Peter Clery

Mar 24, 2018 at 11:41

A further point. If the company buys back or offers to buy back the prefs. at less than the price ruling before the announcement, they would be benefiting from their own market manipulation - a criminal offence. Surely the only way forward to save a bit more of the tattered reputation is an open offer to buy all/any of the prefs at the price ruling the day before the announcement.,

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andrew moffat

Mar 24, 2018 at 12:14

Gravedigger, you are completely mistaken, to the extent that there appears to be some sycophancy in your remarks.

Michael Mason-Mahon is correct: there should have been an apology. None was given. A humiliating U turn was required and it was only made because of the interest expressed by MPs and the FCA, plus that fact that it was clear that Aviva would not receive the support from ordinary shareholders that it expected for this breach of trust. Many ordinary shareholders - of which I am one - were outraged despite the obvious gains to them had the proposal succeeded. Clearly, Aviva believed it could set off one set of shareholders against another. In the meantime, there was significant damage done to the reputation of the Board and the brand, along with some cancellation of household policies in instances where shareholders held such.

There was no suggestion of a consultation, either. Shareholders were not asked to submit their views, ahead of any 'redemption' of what were irredeemable shares.

Indeed, Aviva demonstrated in later releases a stubborn refusal to backtrack. It also relied on the Companies Act 2006; do you really believe that widows and orphans were aware of these provisions, stretched to the nth degree by immoral lawyers?

I share the view of many here that a head must role: either that of the CFO or the CEO. The Chairman does not come out of this well, either.

We are discussing the reputation of the City and moral compass.

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Anonymous 1 needed this 'off the record'

Mar 24, 2018 at 12:26

I spoke to Aviva IR on Friday March 9th and have a transcript of the conversation. When asked if Aviva was aware of the impact that the comments would have an adverse effect on the share price the answer was an unequivocal

yes. A conversation followed and the gist was,,,,,,,,,,,,, No decision has beeen taken but Aviva has the legal right to cancel the shares at par. I have passed on the transcript to my solicitor. Whether the announcement amounts to market manipulation will be for the court to decide.

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richard tomkin

Mar 24, 2018 at 16:56

One of this group's predecessor companies was Norwich Union.It was a mutual society,run largely by Norfolk gentlemen and sharp practice was never entertained.One looks back fondly on those days,before cutting corners and questionable practices became the norm.All that ethos was binned with the ad-

vent of "Aviva" and the here today,gone tomorrow,people now commonly seen at the head of these companies.

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andrew moffat

Mar 24, 2018 at 16:57

An extraordinary conversation, Anonymous 1. May I suggest you forward the conversation to the FCA. As I reflected earlier, there was no consultation in this but there was a remarkable degree of stubborn determination and insensitivity from a company that is a custodian of the finances of ordinary people.

It would have been difficult to make this up. I am quite convinced that heads must roll and an example set.

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Mar 25, 2018 at 07:54

Colin Boylett, if you have not sold, as you imply you haven't, they you have not actually lost anything! If that is so, man up and get real. The dividend will still be paid. Others may be far less fortunate. By the same token, Michael Loveridge, rather than being smug, think of those less fortunate who just may now be suffering real losses. Finally, Colin Boylett, no one allowed holders to believe the prefs. were anything, irredeemable or otherwise, save the holders themselves.

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Michael Mason-Mahon

Mar 25, 2018 at 16:27

Help Save Aviva plc

Please help Remove Sir Adrian Montague as Chairman of Aviva plc

As a customer and shareholder of Aviva plc, I urge my fellow shareholders, stakeholders and customers to

tell the Board of Directors of Aviva plc, we do NOT want Sir Adrian Montague to be the Chairman of Aviva plc, under any circumstances.

I urge my shareholders, stakeholders and customers to email Sir Adrian Montague directly at,

and inform him that you do NOT want him to be the Chairman of Aviva plc, under any circumstances.

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