Aviva firms up £300m figure and kicks off buyback programme

Oliver Gill
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Aviva phased out the Norwich Union brand in the UK from 2008

Aviva has fired the starting gun on a £300m share buyback after building up a bumper war chest of cash.

In March, the insurance giant revealed it had raked in £1.1bn over the last year.

While chief executive Mark Wilson said cash would be returned to investors, he did not put a the figure on the level of returns. He said some of the cash would also be used to pay down debt.

Today's announcement firms up the total amount being returned to shareholders between today and 15 December.

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Shore Capital Markets analyst Eamonn Flanagan said that "the buyback suggests that no major M&A is likely".

Last week Aviva and many of its rivals reported on their Solvency II figures, i.e. the amount of cash insurers are holding as a proportion of minimum regulatory capital requirements.

Flanagan said Aviva likely wanted to wait on how much money would be handed back in case of any "nasty surprises" in the Solvency II numbers.

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The shares will be bought by Morgan Stanley and simultaneously sold on to Aviva. The alternative mechanism could have been the payment of a special dividend, which has a different tax treatment.

"The jury remains out as to which is better... buy-back or special dividend?" said Flanagan. "I suspect management checked with some of the bigger shareholders in coming to the decision to buy back."

Shares in Aviva rose in early trading before falling back. They currently up 0.33 per cent at 531.75p.

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