Aviva shares plummet after £3bn loss and dividend is slashed

Aviva shares tumbled today after the company posted a £3 billion loss, slashed its dividend and scrapped bonuses for senior directors.

The troubled insurance group paid the price for a dismal 2012 in which shareholders revolted against its strategy and pay under former boss Andrew Moss.

Aviva’s new chief executive Mark Wilson, who faces a tough task restoring the fortunes and reputation of the company, admitted it had “not lived up to its potential” and had “disappointed shareholders” over the past few years.

Its loss compared with a £60 million profit in 2011, after writing off £3.3 billion on the sale of its United States business to Athene Holding in December.

The group also bowed to market pressure and cut its final dividend by 44% to 9p following weeks of speculation. The decision comes just over a fortnight after rival RSA rebased its dividend and led to Aviva shares falling 47.5p to 312.4p, a slump of more than 13 per cent which wiped about £1.4 billion from the company’s market value.

“Cash flow in the business is too tight to maintain the dividend,” Wilson, pictured, said. “It’s like climbing up an escalator that’s going down. I joined Aviva because I believe there is significant potential to be unlocked. This is a turnaround story. It is clear to me that the company has not articulated why investors should buy or hold Aviva shares.”

Aviva, which sponsors Premiership rugby union, parted company with Moss last May following an investor backlash at the annual meeting. He was criticised for repeatedly changing its strategy while shares tumbled. Since then, the insurer has sold businesses and put others on the block to slim its structure.

Wilson said pay would be frozen for 400 senior staff at the company while it was overhauled and would not rule out further jobs cuts among its 36,000 employees, which include about 18,000 in the UK.

He said there was no doubt what needed to be done over the next 12 months: “The insurance sector has made an industry out of complexity. We need to be simple and as predictable as a Swiss clock. That is my promise.”

New bosses have only one chance to make a first impression, and Mark Wilson’s axe-wielding introduction today will linger long in the minds of shareholders.

The smooth disposal programme led by chairman John McFarlane that saw Aviva sell assets in America, Russia and Spain gave hope that the insurer’s juicy payout could be preserved. But in truth, after the eye-catching disposals, the real work starts here to put the fans under a lumbering European business.

It means Aviva’s shares today are little moved from last May when McFarlane stepped up after Andrew Moss’s departure. The new brooms can rebuild the divi on their own terms, while laying their reasons for chopping it now at the door of Moss. But that blame game must end here.

James Ashton