Gen.acc.8se.pf Regulatory News (GACA)

30 April 2018

Aviva plc and General Accident plc preference shares

Announcement of Goodwill Payment

Today Aviva plc ("Aviva" or "the Company") and General Accident plc are announcing that they will offer a discretionary goodwill payment to shareholders who sold preference shares* in the period from 8 to 22 March 2018 (inclusive).

In its full year results announcement on 8 March 2018, following clear legal advice, Aviva noted its ability to cancel existing preference shares as part of considering its options to return capital to shareholders. Following that announcement, Aviva spoke to a large number of investors and received some strong feedback and criticism.

On 23 March 2018, in light of that feedback, Aviva announced it would take no action to cancel the preference shares. That announcement enabled our preference shareholders to rest secure in their holdings. Under current regulation the preference shares will no longer count as regulatory capital in 2026 and Aviva will work towards obtaining regulatory approval for the preference shares, or a suitable substitute, to qualify as capital from 2026 onwards. If as we approach 2026 Aviva needs to reconsider this position, it will do so after taking into account the fair market value of the preference shares at that time.

Aviva recognises the uncertainty created for preference shareholders whilst Aviva was considering its options and the impact it had on the wider reputation and trust in the Company. Today, Aviva announces a further step towards restoring that trust. Aviva will offer a discretionary goodwill payment to shareholders who sold preference shares in the period from 8 to 22 March 2018 (inclusive) at a share price that was lower than the price that the preference shares returned to following our announcement on 23 March 2018. This goodwill payment is intended to put those shareholders in the same financial position they would have been in had they sold their preference shares following the 23 March announcement, rather than the first announcement.

Based on the information currently available, Aviva estimates that fewer than 2,000 individual investors sold their preference shares in the period from 8 to 22 March 2018 (inclusive) and that the total cost of the goodwill payment scheme should not exceed approximately £14 million.

Since this voluntary goodwill payment was first proposed by Aviva, Aviva has consulted with the FCA and will continue to engage with the FCA in its investigation of the preference share issue.

Aviva has appointed KPMG LLP as an independent administrator to handle the goodwill payment process. By 31 July 2018, Aviva expects to have completed the preparations required to open and operate that process and will make a separate announcement along with writing to each affected registered holder individually at that time setting out full details of how eligible shareholders can claim their payment. Eligible shareholders will have up to six months to make a claim from the date the goodwill payment process opens.

Mark Wilson, Group Chief Executive Officer of Aviva plc, said:

"Our announcement on 23 March meant that Aviva's preference shareholders could rest secure in their holdings. However, we recognise that whilst we were considering our options for the preference shares this caused uncertainty and led some investors to sell their shares.

"The Board and I want to do the right thing and make this goodwill payment.

"Preference shares remain an industry-wide issue and it is clear now that the best way forward is to seek a regulatory solution before the 2026 deadline when the shares no longer count as regulatory capital under Solvency II.

"We accept that whatever action we take, we will continue to hear divergent views on this topic from various stakeholders. However, together with our previous announcement not to proceed with the cancellation of the preference shares, we hope this goodwill payment goes some way to restoring trust in Aviva."

Further detail on the goodwill payment can be found at the end of this announcement. Questions and answers relating to the goodwill payment can be found at www.aviva.com/investors/preference-shares. A dedicated helpline has been established for any investors wishing to discuss the goodwill payment scheme on:

UK Freephone: 0800 046 8988

International: +44 (0) 1603 606389

(Open 0900 - 1700 Monday to Friday)

Please note that the helpline is unable to provide any further information than that already provided on our website and we are unable to answer any specific questions about individual circumstances at this time. Aviva will issue a further market announcement when the scheme opens and will at that stage update the information available on the website and write to all registered holders of preference shares who have been identified as entering into a sale of preference shares in the period from 8 to 22 March 2018 (inclusive).

*Preference shares issued by Aviva plc and General Accident plc (a member of the Aviva Group)

-ends-

Enquiries:

Media:

Nigel Prideaux +44 (0)20 7662 0215

Andrew Reid +44 (0)20 7662 3131

Sarah Swailes +44 (0)20 7662 6700

Analysts:

Chris Esson +44 (0)20 7662 8115

Diane Michelberger +44 (0)20 7662 0911

Notes:

Goodwill payment

· The base amount for the goodwill payment will be the amount by which the volume weighted average price of the relevant series of preference shares over the five business days from (and including) 23 March 2018 exceeded the sale price for that shareholder's preference shares transacted in the period 8 to 22 March 2018 (inclusive) (the "Basic Goodwill Payment"). For each eligible shareholder who wishes to accept the offer of a goodwill payment, the amount of the Basic Goodwill Payment will be calculated as follows:

- Aviva plc 8.375% preference shares (ISIN: GB0002114154): the amount by which 150.81p exceeds the price at which the preference shares were sold

- Aviva plc 8.750% preference shares (ISIN: GB0002124963): the amount by which 158.02p exceeds the price at which the preference shares were sold

- General Accident plc 7.875% preference shares (ISIN: GB0003692513): the amount by which 140.01p exceeds the price at which the preference shares were sold

- General Accident plc 8.875% preference shares (ISIN: GB0003692737): the amount by which 157.42p exceeds the price at which the preference shares were sold.

· Eligible shareholders may also claim an amount equal to third party transaction costs (e.g. broker commission) incurred in respect of the sale of preference shares ("Transaction Costs"). Further details on the transaction costs which may be claimed and the evidence required to support a claim will be provided when the scheme is launched.

· An additional amount will be added to the sum of the Basic Goodwill Payment and the Transaction Costs calculated by applying a rate of 6% per annum to that amount for the period from 23 March 2018 to the date that is 3 months after the launch of the goodwill payment scheme (inclusive) (the "Additional Amount"). The Additional Amount is intended as a notional investment yield to recognise the fact that if investors had received the Basic Goodwill Payment on 23 March 2018 they would have had the opportunity to re-invest it for income. The rate of 6% is broadly in line with the yield available to investors had they decided to invest in the preference shares at that time.

· Any gains made by a shareholder from investing in preference shares during the relevant period will be offset against the goodwill payment. What this means is that if a shareholder who sold preference shares between 8 and 22 March 2018 (inclusive) following the initial announcement also purchased preference shares between 8 and 22 March 2018 (inclusive), and thereby benefitted from the increase in the share price of the relevant series of preference shares following the 23 March 2018 announcement, then any goodwill payment for which that shareholder is eligible will be reduced by the amount gained from the reinvestment.

· We expect to announce further details of the goodwill payment process by 31 July 2018.

· Eligible shareholders will be the beneficial owners of the preference shares (i.e. the party with the ultimate right to receive the income and the proceeds of sale from the preference shares) who entered into a sale of preference shares with a transaction date of 8 to 22 March 2018 (inclusive). Following this announcement, KPMG will liaise with brokers and nominees to agree the process by which communications are provided to underlying beneficial owners of preference shares and the most efficient way they are able to claim the goodwill payments.

· To receive the payment, shareholders will be required to release Aviva and KPMG from claims the shareholder may have in relation to the preference shares and the administration of the goodwill payment process. We will provide full details on the terms of the release when the scheme is launched (which we expect to be by 31 July 2018).

· Eligible shareholders will need to take their own advice on the tax treatment applicable to receipt of the goodwill payment.

Preference shares

· On 23 March 2018, Aviva announced that it will take no action to cancel its preference shares.

· Under current regulatory environment the preference shares will no longer count as regulatory capital in 2026. Aviva will work towards obtaining regulatory approval for the preference shares, or a suitable substitute, to qualify as capital from 2026 onwards. If as we approach 2026 Aviva needs to reconsider this position, it will do so after taking into account the fair market value of the preference shares at that time.

· On 8 March 2018 Aviva stated it has the ability to cancel the preference shares at par value, having received clear legal advice. The review of the preference shares was initiated as a result of Aviva's duty to examine what is right for the business, balancing the interests of ordinary shareholders and preference shareholders. Aviva needed to address the issue principally because the preference shares would no longer count as regulatory capital in 2026 and their annual cost to Aviva.

· Aviva is in a strong financial position and still plans to deploy £2 billion of excess cash in 2018 to reduce hybrid debt, fund bolt-on acquisitions and buy back ordinary shares.

Aviva

· Aviva provides life insurance, general insurance, health insurance and asset management to 33 million customers.

· In the UK we are the leading insurer serving one in every four households and have strong businesses in selected markets in Europe, Asia and Canada. Our shares are listed on the London Stock Exchange and we are a member of the FTSE100 index.

· Aviva's asset management business, Aviva Investors, provides asset management services to both Aviva and external clients, and currently manages over £350 billion in assets. Total group assets under management at Aviva group are £490 billion.

· Aviva helps people save for the future and manage the risks of everyday life; we paid out £34.6 billion in benefits and claims in 2017.

· By serving our customers well, we are building a business which is strong and sustainable, which our people are proud to work for, and which makes a positive contribution to society.

· The Aviva newsroom at www.aviva.com/newsroom includes links to our image library, research reports and our news release archive.

· For an introduction to what we do and how we do it, please click here www.aviva.com/about-us

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