The insurer said the decision came after speaking to many investors and receiving “strong feedback and criticism” to the proposal.
On 8 March, the insurance giant stated that, having received clear legal advice, it could cancel the preference shares at par value after a review of the business looking at balancing the interests of ordinary and preference shareholders.
It said the decision had been driven by current regulation which states the preference shares will no longer count as regulatory capital in 2026.
But in a statement published on Friday, Aviva said it has listened to shareholders and that it has decided to take no action to cancel its preference shares.
However, Jason Hollands, managing director at Tilney, said Aviva’s preference shareholders were right to be livid.
He said: “These were after all supposedly ‘irredeemable’ and not merely badged as perpetual security with no fixed term.
“This debacle, which has knocked trust in Aviva and left it licking its reputational wounds, really is a reminder of the importance of the principle of caveat emptor when investing directly in individual securities, especially in more esoteric areas.”
Aviva’s initial announcement prompted Treasury Committee chairman Nicky Morgan to pen a letter to the Financial Conduct Authority, asking the watchdog several questions regarding its role as a regulator in this instance.
Morgan wrote: “Is the FCA satisfied that Aviva management’s assertion that these shares could be cancelled at par value with the approval of ordinary and preference shareholders voting as a class was communicated in a manner that was consistent with the Listing Rules, and the Disclosure and Transparency Rules?”
It was also reported that a group of asset managers, including M&G, Invesco, Gam, Blackrock, Legal & General and EdenTree, met with Aviva chairman Adrian Montague to insist the insurer did a U-turn on its decision.
Aviva said it will work towards obtaining regulatory approval for the preference shares, or a suitable substitute, to qualify as capital from 2026 onwards.
Mark Wilson, group chief executive of Aviva (pictured), said: “I am very aware that Aviva is in a position of trust with our customers and investors. To maintain that trust it is critical that we listen to and act on feedback. The reputation of Aviva, and the trust people have in us, is paramount. Our announcement today means that preference shareholders can rest secure in their holdings.
“The board and I have a duty to consider not just the financial implications of our actions. We must consider the impact to Aviva’s wider reputation. I hope our decision today goes some way to restoring that trust.”
