The firm blamed its £3.05bn pre-tax loss, which compared with a profit of £60m in 2011, on the writedowns from the sale of its US business as previously announced.
But the tumble in share value wiped as much as £1.7bn of the group’s market cap. By mid-morning the stock’s price had recovered slightly and sat 12% down, suggesting some investors viewed its big drop as a buying opportunity. Year-on-year the share price is down 10%.
Read about Aviva Investors’ profit slump here.
Top holders of Aviva shares are GAM’s Andrew Green, who has 6.3% of his UK Diversified Fund in the company, and John White, manager of the GLG UK Income Fund, who has 4.4% in Aviva. Both managers have Aviva as their highest conviction holding.
In his latest factsheet for the month to 31 December, Green said gains had been led by Aviva as well as his positions in Dixons, Royal Bank of Scotland and ITV – which he termed recovery stocks.
He said defensive qualities in the UK market had become overvalued and that the best opportunities now lie in the more distressed parts of the market.
Poor start to 2013
Meanwhile, White’s January factsheet said Aviva had been the stock with the biggest drag on performance: "Following a strong performance into year-end Aviva underperformed as investors focused on upcoming results and whether or not there would be a change to the firm’s dividend policy."
Turns out they were right to be concerned, with the final dividend 9p per share compared with 16p per share in 2011, taking the full-year dividend to 19p from 26p a year earlier.
The company said the dividend had been rebased to reduce debt and increase retained earnings to ensure the pay outs are covered by earnings and cashflow.
Mark Wilson, group CEO, said: "2012 was a year of transition at Aviva. There has been solid progress against the turnaround plan set out last year. Our capital strength has improved materially and we have completed the vast proportion of the disposal programme. We have made progress reducing costs and we also have a strong new management team in place.
"The rebasing of the dividend is about giving certainty to shareholders, reducing debt, and putting Aviva in a sound position for the future. This is the right course of action."
Reassess investment case
Stockbroker Killik & Co said it would be reassessing its buy stance following Aviva’s change to its dividend policy.
Jonathan Jackson, head of equities at the company, said: "Aviva is currently trading on 8.4x consensus 2013 earnings, however, we would expect downgrades of around 10%.
"With the dividend in 2013 expected to be around 14.5p, the prospective dividend yield is now 4.6%, in line with peers. As Aviva is no longer offering a significantly better yield than peers, and with limited growth opportunities, we will be re-evaluating our Buy recommendation."
