Shares in Aviva tumbled this morning after the insurance group slashed its dividend by more than a quarter in a bid to trim its debt pile.
The firm proposed giving shareholders a final dividend of 9p a share, down from 16p a year ago. That will take the total dividend for 2012 to 26p, which is 27 per cent lower than the previous year’s payout.
Chairman John McFarlane said: “I regret this has become necessary, but can assure shareholders we took this decision only after examining scrupulously all alternatives.
“The need to ensure that the current and future dividend is sustainable and covered by operating cash generation is fundamental.”
The cut will help Aviva pay down debt and build up its capital reserves, he added.
Aviva also announced a total loss of £3 billion for the year, compared with a £60 million profit in 2011, after taking a £3.3bn writedown on the sale of its US business.
Aviva’s shares were down almost 12 per cent in mid-morning trading. Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Prudent though it may be, the dividend cut is a major disappointment.”