Aviva PLC (LSE:AV.) shares headed higher after the company jumped further onto the share buyback bandwagon.
The insurance giant proposed a proposed return of capital of £3.75bn to shareholders by way of a B share scheme. This is in addition to the £1bn share buy-back which is already underway.
Whether that will be enough to satisfy activist investor Cevian Capital remains to be seen but the signs are reasonably promising.
The Anglo-Swedish investment firm has been pressing for a return of at least £5bn by the end of this year but the Financial Times quoted Cevian partner Niko Pakalén saying nice things about the leadership of Aviva after the company issued its full-year results on Wednesday. Nevertheless, Pakalén griped that the company’s transformation has still not been recognised by the market.
According to the FT, Cevian Capital, which recently upped its stake above 6%, believes Aviva has capacity for a substantially higher dividend, and floated the figure of 50p for the 2024 payout, compared to Aviva’s “illustrative” estimate of a 33p payout that year, up from an illustrative 31.5p or so for 2023.
The insurer proposed a final dividend per share for 2021 of 14.7p (2020: 14.00p), with the total dividend per share for the year up 5% to 22.05p (2020: 21.00p).
The dividend increase came despite a 10% slide in operating profit from continuing operations at £1.63bn. Excluding UK Life management actions and other bits and pieces, operating profit was up 16% year-on-year, which chief executive officer Amanda Blanc said demonstrated the core earnings potential of Aviva.
The insurer’s generosity has been enabled by a string of big disposals, allegedly leaving the group a leaner outfit focused on its core markets in the UK, Ireland and Canada; however, today it announced the acquisition of Succession Wealth for £385mln.
The acquired company would boost Aviva’s presence in the fast-growing UK wealth management market, Blanc said.
Aviva also revealed it is looking to get shot of its exposure to Russia although Blanc said in a conference call to journalists that Aviva Investors’ exposure to Russia is less than 0.1%.
“We will be divesting of that exposure as soon as we practically can,” Blanc said.
Shares in Aviva were up 0.9% at 410.2p in afternoon trading.