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* Four UK-listed insurers suspend dividends
* Moves follow British central bank's advice
* Aviva, Direct Line and RSA shares drop in early trade
(Adds share moves, background, analyst comment)
By Sinead Cruise and Muvija M
LONDON, April 8 (Reuters) - A slew of British insurers
cancelled billions of pounds of dividends on Wednesday, in moves
welcomed by the Bank of England which had cautioned the sector
of the risk of heavy costs from the spread of the coronavirus.
Aviva, Direct Line, RSA and Lloyds
of London member Hiscox all said they would
halt planned payouts in view of the highly uncertain toll the
COVID-19 pandemic would likely wreak on their businesses,
customers and the global economy.
"This is a difficult decision, not least in terms of the
initial impact it will have on shareholders," RSA Chairman
Martin Scicluna said.
"No company exists in a vacuum and at this time we judge it
to be in the best long-term interests of RSA to show forbearance
on dividends and maximise our capability to support customers
under the terms of their respective policies and play our part
in industry initiatives to support relief efforts," Scicluna
added.
Shares in Aviva, Direct Line and RSA suffered falls ranging
from 3.1% to 9.1% by 0832 GMT, while Hiscox reversed early
losses to trade up 0.7%.
Regulatory authorities including EIOPA and Britain's
Prudential Regulation Authority had earlier urged restraint on
dividend payments by insurers and bonuses to their senior staff.
"When insurers are considering whether or not to proceed
with any dividend payments, their boards should pay close
attention to the need to protect policy holders and maintain
safety and soundness," the BoE said in a statement.
"Decisions regarding capital or significant risk management
issues need to be informed by a range of scenarios, including
very severe ones," it added.
HOLD-OUTS
Wednesday's actions leave Legal & General and
Prudential as the last remaining UK sector heavyweights
to resist pulling payouts.
L&G said last week it was committed to its distribution and
that its solvency position remained robust despite the
significant market volatility, while Prudential chief Mike Wells
on March 11 described his firm's policy as "appropriate".
But some analysts said it was possible others would follow
their rivals' lead.
"We would not rule out other UK insurers following this
precedent and see Beazley, St James's Place,
Prudential and M&G as all having higher levels of
uncertainty at the current time," JP Morgan analysts said,
adding that L&G had one of the highest levels of asset risk.
The moves come just over a week since the PRA asked major UK
banks to suspend their dividends and scrap cash rewards for
executives and other high-fliers.
Aviva - which had on March 5 said it would pay a final
dividend of 21.4 pence per share, worth 839 million pounds ($1
billion) in total - also said it would review all material
company spending as part of plans to insulate its business from
the economic fallout of the coronavirus pandemic.
The company said it remained "well capitalised with strong
liquidity" and retention of the final dividend would boost group
capital ratio by around 7% to approximately 182%.
Hiscox, which underwrites a range of risks including fine
art, classic cars, kidnap and ransom, said it would also not
propose an interim dividend payment for 2020 or conduct any
share buyback.
Britain's biggest motor insurer Direct Line said it would
make no changes to staffing until at least autumn as it weighs
the damage the coronavirus shutdown have had on the industry.
($1 = 0.8128 pounds)
(Additional reporting by David Milliken
Editing by Dhara Ranasinghe and David Holmes)
