STANDARD Life investors are to share a £302 million special dividend windfall in a move which has cast further shadows over the performance of its rival Aviva.
While the Edinburgh-based group was unveiling the 12.8p a share payout on the back of bumper profits, Aviva shares were tumbling as new chief executive Mark Wilson announced its dividend was being slashed by more than a quarter to build up capital reserves for the turnaround of the business.
The Aviva dividend shock came as it announced a £3 billion after-tax loss blamed on writedowns and costs
connected to exiting its US life and pensions business.
It also revealed that no bonuses would be paid to executive directors for 2012. In addition, 400 of the most
senior managers in the group will not get pay rises this year.
Standard Life’s special dividend will come on top of a regular payout of 14.7p, up 6.5 per cent as it announced operating profits for 2012 of £900m, up by 65 per cent and ahead of the £853m consensus expected by analysts.
The improvement was driven by Standard Life’s core UK division, where operating profits rose 58 per cent.
Chief executive David Nish, who will himself receive more than £180,000 in dividends on his personal shareholding, said the special payout reflected the company’s strong capital position.
It saw an 18 per cent rise in customers for DIY-style self-invested personal pensions (SIPPs), while SIPP assets under management rose 17 per cent to £19.6bn. Group-wide assets under management leapt to a record £218.1bn from £198.4 billion in 2011 thanks to the stock market rally. The group added that it was well placed to benefit from regulatory changes in the UK such as auto-enrolment and the retail distribution review (RDR), which came into effect in January banning commission payments from product providers across the industry.
Analyst Eamonn Flanagan of Shore Capital described the results as “excellent” and said they vindicated management’s strategy of “focusing on costs together with driving revenue and capital efficiencies”.
Aviva chief executive Wilson, who took the helm recently after turning around the performance of Asian insurer AIA, said the dividend cut was a
difficult decision but “absolutely necessary to give certainty to our shareholders, to reduce debt and put Aviva on a sound footing for the future”.
Aviva, which employs about 2,500 staff in a big general insurance division north of the Border, made up of 1,500 based in Perth and a further 1,000 in Bishopbriggs, blamed provisions connected with its exit from its US life and pensions business for its huge headline loss which compared with a £60m profit in 2011. Underlying operating profits edged down to £1.7bn from £1.8bn.
Wilson said Aviva’s capital position had “improved markedly” through the actions that had been taken.
He said the insurance sector “has made an industry out of complexity” but that, by contrast, he wanted Aviva to be in its offering “as predictable as a Swiss clock”.
Shares in Standard Life, which have risen by 60 per cent in the past year, dipped 1.2p to close at 373p. Aviva shares dropped by 45p, or 12.5 per cent, at 314.8p.