Aviva faces renewed backlash over cancellation of preference shares plans

Aviva has once again found itself at the centre of controversy as it seeks to revive its proposal to cancel £450 million worth of preference shares. This comes seven years after a previous attempt faced intense criticism and ultimately led to significant upheaval within the firm.

In an effort to placate dissenting voices, the insurance giant has promised holders of the preference shares the opportunity to vote on the proposal. Additionally, Aviva is offering a substantial premium over the current market price, aiming to make the offer more appealing to shareholders.

This proposal is not without its problems. The last attempt to cancel preference shares resulted in an uproar, leading to questions in Parliament and censure from the Financial Conduct Authority. The backlash was so severe that it contributed to the departure of then-chief executive Mark Wilson, underlining the sensitivity surrounding such financial instruments.

Despite institutional investors showing support for the plan, many retail shareholders remain apprehensive. The shares in question are often viewed as a reliable source of income, and forcing a buyback could prove detrimental for those relying on these dividends. Financial advisers are urging retail investors to carefully consider their votes ahead of the meeting scheduled for April 15.

Aviva’s rationale for the cancellation stems from the changing regulatory landscape. Under new Solvency II rules, the preference shares will cease to count as capital from next year. The firm describes these shares as an inefficient form of funding that no longer meets its operational needs.

As the company navigates this complex situation, its handling of the proposal could significantly impact its reputation and shareholder relations moving forward. The impending vote will undoubtedly be a crucial moment for both Aviva and its shareholders.