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* Four UK-listed insurers suspend dividends
* Moves follow British central bank's advice
* Aviva, Direct Line, Hiscox and RSA shares drop
(Adds details)
By Sinead Cruise and Muvija M
LONDON, April 8 (Reuters) - British insurers cancelled more
than 1 billion pounds ($1.2 billion) of dividends on Wednesday,
in moves welcomed by the Bank of England which had cautioned the
sector about 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 due to the uncertainty over the pandemic's
impact on their businesses, customers and the global economy.
The cancellations represent another crushing blow to many
pension funds and individual investors who have anchored their
portfolios with insurance company stocks and who have come to
rely on their historically secure income streams and growth.
"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," Scicluna added.
Shares in Aviva, Direct Line, Hiscox and RSA had suffered
falls ranging from 1% to 8% by 0930 GMT.
Aviva, RSA and Direct Line were set to pay an aggregate 1.2
billion pounds ($1.5 billion) in dividends for the period.
A spokeswoman for Hiscox did not give details on the capital
it would retain, as its payout depends on scrip dividend take
up. In 2018, the company paid a final dividend of $81.4 million.
Regulators including Europe's EIOPA and Britain's Prudential
Regulation Authority (PRA) had earlier urged insurers to show
restraint on dividends as well as bonuses to 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 Bank of England 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 (L&G) 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 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 L&G had one of the highest levels of asset risk.
The moves come just over a week after the PRA asked major UK
banks to suspend their dividends and scrap cash rewards for
executives and other high-fliers.
Aviva 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 the
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 David
Holmes and Mark Potter)
