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Aviva threatens to cancel high yield preference shares

Aviva threatens to cancel high yield preference shares

by Michelle McGagh Mar 13, 2018 at 07:00


Thousands of investors in Aviva (AV) preference shares have been dealt a blow after the insurer signalled it may seek to cancel the high-yielding investments.

The insurer revealed it is considering cancelling £450 million of preference shares, which will save it £38 million a year in coupon payments.

The shares feature high fixed dividends of between 7.875% and 8.875% and their strong yields had led to them trading at high premiums to their 'par' values, or issue price.

Aviva's threat to cancel the shares at par value, announced alongside  full-year results on Thursday, sent them tumbling. Aviva's 8.75% preference shares are down 30.7% since the announcement, while the 8.375% shares have dropped 28.8%.

Preference shares issued by General Accident, the car insurer which merged with Aviva predecessor Norwich Union in 2000, have also been hit by the news. Its 8.875% preference shares have fallen 30.3%, with the 7.875% shares dropping 22.1%.

Aviva warned in its full-year results that it had 'the ability to cancel preference shares at par value through a reduction in capital, subject to shareholder vote and court approval'.

'The preference shares carry high coupons that are not tax-deductible and they will not count as regulatory capital from 2026.'

Bond expert and investor activist Mark Taber of Fixed Income Investments has written to Aviva on behalf of the 580,000 retail investors who could see their incomes hit.

He said that the insurer had made ‘no previous public reference to believing the preference shares could be cancelled at par without a class vote [of the holders]’ and that the prospectus stated they ‘shall not be redeemable, save with the approval of the holders’.

Taber criticised the insurer for the way it has gone about trying to redeem the preference shares, involving ordinary shareholders who are likely to vote for redemption in order to save £38 million in coupon payments and whose votes outweigh those of the preference shareholders.

Taber added that ‘for many years the market has priced the preference shares on the basis that they cannot be redeemed without class consent of holders or a winding up of the company’.

‘Aviva will have been well aware of this and has taken no steps to inform the market otherwise,’ he said.

The news also knocked the broader preference shares market. Insurer Ecclesiastical, whose preference shares dropped 11% on Aviva's announcement before rebounding, issued a statement to the market yesterday reassuring investors.

'Ecclesiastical notes Aviva's governance statement that "as one of the biggest companies in our sector, we aim to make our industry work better for everyone",' it said.

'Ecclesiastical trusts that Aviva will follow the principles set out in that statement when considering whether to pursue this course of action.'

Ecclesiastical is also a holder of Aviva and General Accident preference shares, but said the holdings were 'not material in size in the context of Aviva's announcement and Ecclesiastical's balance sheet strength'.

The situation with Aviva mirrors that of Lloyds (LLOY) in 2016, which bought back £3 billion of bonds from investors but not before a Supreme Court battle.

The ‘enhanced capital notes’  paid a generous 10% interest but the court ruled that the bank was within its rights to redeem them despite a campaign headed by Taber to prevent it from doing so.

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Comments  (89)

  • Norman E: 

    I hold all three of the securities, all bought at prices higher than par, and Aviva ordinary shares. I am appalled that Aviva are seeking to use the votes of one class of shareholders against another class. Only a company with no moral compass would consider this to be anything other than fraud when the holders of the shares thought that they were protected by a requirement that they alone would have to vote for any change in their rights.

    The prospectus I have looked at has some convoluted wording regarding the pricing of any redemption other than in a winding up, relating the price to the greater of par and a formula relating the price to the yield on the now defunct 3.5% War Loan. That may avail us nothing.

    When John Lewis wished to redeem preference shares they did so at par for 5% shares and at a 50% premium for 7.5% shares. Aviva need to make a redemption offer at a suitable premium, give up this matter entirely.

    09:06 on 13 March 2018

  • PaulSh: 

    Aviva is undergoing a "reduction in capital", in which case section 4(iii) applies (at least in the 8.375% CU share prospectus) and specifies a redemption value of par plus any outstanding accrued dividend. However, the plain reading of sections 4(i) and 8(iii) is that the shares may only be redeemed if a majority of the holders of the preference shares themselves agree.

    Of course, corporate lawyers earn a lot of money from convincing judges that the plain reading is not the intended one. One case that comes to mind was, I think, to do with guaranteed annuity rates, where it was ruled that the guarantee would only have been legally binding if it had been spelled in the pension contract with a capital G.

    09:44 on 13 March 2018

  • John Lumbroso: 

    I believe this is down right robbery. I am 87 and rely on the income and invested

    mainly because they were so called IRREDEEMABLE

    09:54 on 13 March 2018

  • Slacker: 

    Ouch! Pref shares were ~20% of my retirement portfolio, massive hit taken already. Fool for thinking 'Irredeemable' might have had any meaning to scum like Aviva I suppose.

    09:56 on 13 March 2018

  • dandigirl: 

    Having followed the Coop shenanigans of last year when Noteholders were required to accept up to 45p in the £ and the earlier cancellation of Lloyds’ ECNs - both with the consent of the courts and with our regulators doing absolutely zip, pref. holders might as well accept that the game is up. If Aviva are of a mind to see this through - and they will have considered all the possible consequences before the announcement - then they will. This is following the Lloyds Bank template. First step was to make the announcement and thereby reduce the market price. Any buyer now is on notice of the possibility. Step two: Instruct the lawyers. And by the way, who is going to stop them? Mark Taber cannot be expected to take this on alone. He will need support of all kinds, including a fund for legal and other costs. And most likely some clever counsel will find some obscure precedent and the Courts will find in favour of Aviva. Let us also bear in mind that someone will be paid a big bonus on successful completion. Am I cynical. Too right.

    11:23 on 13 March 2018

  • Norman E: 

    The best hope is to convince the big and small ordinary shareholders of the injustice they will be asked to vote for. If the big pension funds tell Aviva that they will not vote for this scheme, it will go away.

    If Aviva want to cancel the preference shares they can do so by buying them in the market, something their announcement has now made much cheaper. The cynic in me says they may be doing so, will buy themselves a majority, and then vote to cancel the rest at par. Their threat to reduce capital in this way might just be a ploy to enable them to buy up the preference shares cheaply. At the current prices they could buy half at about a 22% premium and then get the rest at par.

    11:40 on 13 March 2018

  • Andrew Hill: 

    Surely that constitutes market manipulation.

    11:49 on 13 March 2018

  • Norman E: 

    It probably does, but the prices of all three have gone up a little since the first fall after the announcement. How can we find out who is buying?

    12:14 on 13 March 2018

  • William jones via mobile

    I'might a novice, I have held General Accident 8 7/8 for more years than I can remember. What exactly does par mean

    14:28 on 13 March 2018

  • philip baker: 

    I have written to the FCA about Aviva market manipulation and allowing or creating a false market in securities. If every holder writes to the FCA they might even look at this. Due to the poor FCA reporting structure i had to report this as a scam.

    Also a letter direct to Aviva, one to my MPand happy to help support Mark Taber.

    He got a good deal with bank of ireland a good deal on bradford and bingley. Mark has the patience and ability to deal with these things.

    I myself am in favour of direct action, a lobby full of pensioners at Aviva head office, cameras from the BBC or someone with a camera to record for youtube might make the money grabber at the top on £4 million a year think again, want to save money slash the bonuses for the money grabbers at the top.

    14:35 on 13 March 2018

  • Alan Parks: 

    It is a moral issue.

    Aviva’s threat to cancel its prefs at par will raise questions in many minds. Not least if clients and policy holders fear that they too will be treated with disdain if preferred share holders can be so treated and Aviva “gets away with it” as commentators suggest they may.

    But will they get away with it? Will there be unintended consequences? For example; will the EU be happy to give morally bankrupt financial institutions a passport to trade in the EU after Brexit. This may affect all of us. The EU will be watching.

    As of 27th Feb. Aviva issued over 4000 m ords at 25p each to trading on which they pay a dividend of 27.4p (a coupon of 109.6% - try cancelling those at par ;-)) draining abt.£1100 m from the business. The pref dividend is less than 4% of that; little reward for such a big risk!

    Is there no one on the board of Aviva to stamp on this “clever Dick” who thinks he or she can score points over the, mainly, prudent elderly savers who gave him or her birth but now only seek to preserve capital ?

    Is there not a non-exec to warn of damage to image and reputation, to question if this will derail the acclaimed recovery from a choppy past, to advise that credibility is hard earned but easily lost by a lapse in morality? Morality trumps legality and this is a moral issue.

    Is Aviva irredeemable?

    14:37 on 13 March 2018

  • Norman E: 

    I too have reported this as a "scam" to the FCA but have little faith that a body I regard as seriously incompetent will do anything, after all its not a small IFA firm that they can bully. Philip Baker, I would be interested to know who you wrote to at Aviva. I will do the same.

    15:35 on 13 March 2018

  • philip baker: 

    Hi, Norman I wrote to the 2 arch villains at the top. Mark Wilson and Tom Stoddard.

    However reading what Alan has put above perhaps I should be writing to all the directors. Putting the moral case.

    Perhaps preference holders should suggest cancelling the ordinary shares at par, I know that is rubbish, but that is what I feel Aviva are doing to us.

    I hold many GACA shares as I am on the cusp of reaching the age where I can retire. I have always reinvested the dividends, so the last dividend was invested at 175ish.

    My original plan was that as these were fixed income they would help pay me a good pension income in retirement and could be left for my kids as they were irredeemable.

    I really thought I had read the prospectus and understood what I was buying.

    Just had this email response from Aviva

    Thank you for your email to Mark Wilson and Tom Stoddard, who have asked me to respond on their behalf.

    As you have identified, in our 2017 full year results it was noted that we have the ability to cancel the Preference Shares issued by Aviva plc, at par value (plus accrued interest and any arrears) through a court approved reduction of capital, subject to the approval of ordinary and preference shareholders voting together. This mechanism is distinct from a redemption and has been a feature of the Preference Shares since they were issued.

    As reported, Aviva has around £2bn of surplus capital to deploy in 2018 and is considering its options in this regard. The Board included reference to the Company’s ability to cancel the preference shares following a reduction of capital in the 2017 Results announcement as this is one of the options under consideration. The Preference Shares have a high coupon which is not tax deductible and will not count towards the Company’s regulatory capital from 2026 and the Board needs to consider how best to balance between the respective interests of ordinary and preference shareholders. However, no decision has yet been taken on which option to pursue. If and when a decision is taken, we will make the appropriate market announcements. In the meantime the Preference Shares will continue to attract the stated dividend.

    Thank you for writing and advising of your concerns. The Board will, of course, take into account shareholder views when considering the options available to the Company. Should there be any further developments in respect of the Preference Shares we will of course advise all shareholders.

    Kind regards

    Roy Tooley | Head of Secretariat – Corporate & Board Governance

    Please would everyone with Aviva, preference shares or otherwise email the board and let them know your feelings now. Please give this as wide spread coverage as possible.

    16:39 on 13 March 2018

  • Andrew Vincenti: 

    Let’s see what the Fraudulent, whoops sorry the Financial Conduct Authority will do - no doubt as usual sweet effa. And of course the courts will rule, if called upon, in favour of Aviva. After all, the Establishment must look after itself. Looked at those pref shares, but never bought them.

    17:35 on 13 March 2018

  • philip baker: 

    my response to Aviva, please publicise as much as possible, power to the people.

    Good afternoon,

    Roy Tooley,

    Thank you for your response on the preference shares.

    I note in your email you state. "subject to the approval of ordinary and preference shareholders voting together."

    In the preference share prospectus i can find no mention of this.

    The prospectus seems to clearly state the opposite. " any change must be voted on by preference shareholder" redemption is the most significant change is it not?

    The prospectus makes no mention of ordinary and preference shareholders voting together. Can you please clarify this for me?

    If preference share are going to stop being regulatory capital in 2026 should Aviva and other companies with preference shares, not join together to stop this absurd change as preference shares are very stable capital.

    I and other preference share holders would be happy to join you in lobbying parliament and our own MPs on this issue.

    Please would you provide me with email addresses for all the board members as i would like to address the preference share issue with all the board members.

    I do not know if the company has been reading what preference share holders are saying but there are a large number of very upset and scared preference shareholders. All of us are hoping for more clarity, is this the end for us? Is this the end of stable income? For those of us who have been buying the shares at above par for years why when the shares went above par in 2009 were holders not advised then that the company might buy them back for £1 this would have kept a lid on the price and i would not have kept reinvesting my dividends for the last 15 years.

    My most recent investment was happily made at 175 giving me a 5% return about the same as you get on ordinary aviva shares. This is not a high coupon based on the price i was paying.

    You might note that Aviva ordinary shares have a price of 25 p each at par and the dividend is over 100% of this price, so some of the arguments about high coupon do not add up when we look at the real market price of just a few days ago.

    I am hoping the company restores order and makes a statement that Aviva will never try and force a sale of preference shares at £1.

    The fairest and most moral way to redeem these preference shares, if the company feel that is appropriate would be to buy in the market or to make an open offer at the prices of a few days ago.

    I do not know what Aviva would morally have to do for those people panicked out of the shares.

    I look forward to your further responses and i look forward to your help in making it easy for preference shareholders to contact the board with there heart felt concerns.

    Kind regards

    Philip Baker

    17:43 on 13 March 2018

  • philip baker: 

    Response so far from the FCA

    Every single holder should be taking action.

    Contact your local news, national news, the newspaper you read, posting on facebook etc,

    Dear Mr Baker

    Thank you for your email below raising concerns over Aviva Plc’s proposed treatment of its preference shares. We will review the issues that you have raised and respond in due course.

    Yours sincerely

    Market Integrity Unit

    Primary Market Oversight / Enforcement and Market Oversight Division

    Description: cid:image001.png@01D2A7C9.64DDD390

    25 The North Colonnade

    Canary Wharf


    E14 5HS


    Follow us:

    Description: https://g.twimg.com/Twitter_logo_blue.png Description: image003

    Submitted on Friday, 9 March, 2018 - 21:18

    Submitted values are:

    Type of scam: : Share fraud

    Name of the firm you are reporting : Aviva plc

    All contact details you have for the firm :

    Mark Wilson , made comment that the company would redeem irredeemable shares for £1 (par). This person has caused preference shares in General accident and aviva to collapse. It has unsettled many other preference shares. I worry that this is market abuse it has caused me significant losses, i do not feel any financial company should act in this way.

    I find it extraordinary that given the confusion that has been caused, including the spillover into other preference shares, that Aviva has not sought to make any clarifying statement. They have created an extremely volatile market in which investors have little clarity or insight into the basis on which they may be trading.

    How did they contact you? : i saw the news on a website

    When did they contact you? : Thu, 08/03/2018

    What product/service were you offered? :

    made comment that the company would redeem irredeemable shares for £1 (par). the shares were £1.75


    Why do you think it is a scam? : they are trying to buy irredeemable shares for less than they are worth.

    If you were asked to transfer money, tell us exactly what you were asked to do. :

    Please provide full details of any bank accounts you were asked to pay your money to, including sort code, account number and account name. :

    Upload any documents you have received from the firm :

    Your details :

    Your details

    Your name : philip baker

    17:47 on 13 March 2018

  • Tim Blaxter: 


    4.3 says it all...Aviva can all this a 'return of capital' and only pay out par

    17:56 on 13 March 2018

  • Andrew Finbar via mobile

    I agree this is clearly a scam. If the EU and for that matter the USA see how retail investors can be treated without any protection from governing bodies post brexit then we are going to have a very short lever of leverage indeed when it comes to allowing any British financial institution any form of unfettered access to their markets. I am a great believer in Karma. What comes around goes around.

    17:59 on 13 March 2018

  • William Phillips: 

    The court's perverse judgement in the Lloyds ECN affair evidently emboldened Aviva. Terrible PR, though.

    Nice bit of discreet knuckle-rapping by Ecclesiastical.

    Get behind Taber. If anyone can win this fight, he can.

    18:10 on 13 March 2018

  • Garth Nicholson: 

    If the Lloyds ECN case is anything to go by Aviva Pref holders are fighting a losing battle. When it gets to Court the learned Judges and the Golden Circle Lawyers will dance round the niceties of some spelling in the prospectus and Aviva will win the day. 'Drafting Infelicity' was the phrase invention used in the Lloyds case.They are following exactly the path of the Lloyds ECN case, starting by devaluing the shares by their announcement and the FCA will look on from the sidelines and do nothing. I don't hold AV.A but I hold many other pref shares that this will reflect badly on. I do hold AV. ordinaries and as such would vote against the motion as I do not believe that Aviva being allowed to get away with this does anything for their reputation nor the even more important reputation of British Law.

    Make sure all holders vote at the meeting that will be called.

    18:12 on 13 March 2018

  • philip baker: 

    If we do not stand we will fall.

    If these preference shares go, few others will be worth holding at above par as at any moment they could be cancelled. For par plus interest.

    Had these shares been trading at 50pence in the £1 would Aviva have made the same statement or would they have quietly bought them in the market and cancelled them?


    18:19 on 13 March 2018

  • Garth Nicholson: 

    I realise that this will make no difference to the outcome but anyone who understands investments will know that preference shares do not pay interest, they pay a dividend. Strangely the term is used incorrectly by Aviva themselves, who also don't understand the difference in terminology. Let's hope the Golden Circle lawyers don't manage to somehow turn this infelicity against the holders.

    18:42 on 13 March 2018

  • bar chid: 

    I am not a holder of these prefs, but I am a policyholder of Aviva & I take the simplistic view that if they wriggle out of a prospectus as they are trying to do, how reliable can I believe my policy may be in the event of a claim ?

    Upon renewal it will be with a different company, more expensive or not.

    Insurance is a trust business, perhaps Aviva do not believe that anymore ?

    19:03 on 13 March 2018

  • Frank 1: 

    Completely agree bar chid, have a house policy with them too, which now doubt its value. If Aviva are serious about the tax and regulatory capital issue then they should work with the regulator, heaven forbid that useless lot, to create something these prefs can be rolled into that will satisfy those points and maintain the same yield for holders

    20:29 on 13 March 2018

  • Frank 1: 

    From past experience, I strongly suggest all holders register themselves with Mr Taber, as his efforts for the small guy are beyound reproach

    20:36 on 13 March 2018

  • Paul Nash 2: 

    Indeed bar chid. Why would anyone trust a company that scams its own members? One more company, along with Lloyds for my "avoid" list I think.

    I don't think I am affected, but might be if I hold any funds that holds Aviva preference shares. I wonder if any Aviva funds hold them? Probably not, no doubt given advanced warning of this.

    There should be clauses in company articles of association and prospectuses that provide protection in cases like this. Trouble is, if badly drafted, such clauses can be exploited by ruthless individuals. Preference share holders are typically entitled to par value in the case of a company being wound up. This is a protection put in to make sure preference share holders are paid ahead of ordinary shareholders in case of bankruptcy, etc. It is not supposed to be used by companies to cancel preference shares as and when they feel like it. Redemption and call clauses provide for cancellation, but if no redemption date or explicit call options are specified, it should not be possible to cancel shares other than by a company buying its shares in the market, or class shareholders approving a modification of terms.

    20:44 on 13 March 2018

  • Garth Nicholson: 

    Frank 1's comment is most relevant.. Contact Mark Taber at his website here, he has the name Old Boy Returns:-


    Read the section on the Aviva Prefs, it's some 19 pages long. Mark works tirelessly on these sort of causes and needs all the support he can get.

    20:48 on 13 March 2018

  • andrew moffat: 

    I have just read this article and am horrified. As a holder of Aviva Ordinary, I will certainly vote against such a proposal but fear many institutions will do the opposite. We have, here, an issue of moral compass and this is particularly poignant given that this company is involved in savings' products.

    I suggest preference shareholders write to the Non-Executive Directors, whose specific task is to attend to the interests of shareholders, over and above the strategy of the company.

    If Aviva wish to cancel these shares, either they should purchase in the market or make an offer at the market price plus, say 2%.

    23:17 on 13 March 2018

  • Dick Turpin via mobile

    Highway robbery! ‘Stand and D’Aviva’!

    06:38 on 14 March 2018

  • gadgetmind2: 

    I have a DC pension pot with Aviva that I will be moving elsewhere ASAP. Who knows what else they think they have a right to confiscate on the slimmest of legal excuses?

    09:38 on 14 March 2018

  • G. Shaw: 

    I definitely think it’s worth informing Aviva, that if they go through with this ‘robbery’, that I will NEVER buy any product from them in future.

    12:46 on 14 March 2018

  • TonyN: 

    Well, I hold none of the Aviva prefs, but this communication has dropped the value of my Lloyds, Santander and Stan Chart prefs by over £20,000! So this is even more of a disgrace than at first appearance.

    It really shows the long term knock effect the Lloyds ECN decision, and lack of regulatory action from the FAC, is going to have on the UK prefs market.

    What next?

    Compulsory buy back of shares at nominal?

    I will be selling my Aviva shares and will never buy an Aviva product again.

    The investable financial services market for shares and products is going to get smaller over the next few years, as we progressively boycott these companies (but will ultimately make no different as the institutions will just take up the slack, buying each other's shares as small investors depart)

    14:14 on 14 March 2018

  • andrew moffat: 

    Interesting comment from TonyN. Probably, pref shareholders across the board should join forces on this.

    The Lloyds situation, whilst unacceptable, is not quite a parallel case. Lloyds was on the brink of collapse.

    I wonder whether representations to the London Stock Exchange might be worthwhile.

    Clearly, Aviva depends upon savings' flows. That it is prepared to destabilise the interests of its own pensioners, who are shareholders in its preference stock, demonstrates a remarkable insensitivity. It must be prevailed upon to issue a statement that it will, under no circumstances, embark upon the immoral action it suggested.

    14:43 on 14 March 2018

  • TonyN: 

    Andrew, to be fair, Lloyds were in no way anywhere near the brink of collapse - in part because people bought the very ECNs they then cancelled, shafting all holders last year.

    This is very comparable - Aviva issued these prefs when they needed money. Presumably the very best rate they could get at that time was those offered in these prefs, issued as ostensibly perpetual.

    15:01 on 14 March 2018

  • TonyN: 

    I have written to the FCA, pointing out the effect this communication has had on other Prefs.

    I guess the thing to do now is to write to Lloyds, Santander and Standard Chartered to ask for their future intentions!

    15:20 on 14 March 2018

  • gadgetmind2: 

    An orderly capital restructuring, that fully respects the capital hierarchy, when an institution is in trouble is one thing. With the Lloyds ECNs and these Aviva prefs, the executives just want some extra bonus to trouser, and shafting a few 100k retirees is (to their eyes) a perfectly acceptable way to achieve this.

    15:20 on 14 March 2018

  • andrew moffat: 

    Lloyds was on the brink of collapse in 2008, however reneging upon moral obligations is unacceptable - in Lloyds case, on the basis of some fine legal nicety, argued by a clever lawyer..

    The Stock Exchange should make a ruling on this, to prevent this type of conduct re-occurring and the uncertainty it brings.

    15:28 on 14 March 2018

  • TonyN: 

    Yes, that was my point. on the brink of collapse when they issued the ECNs which helped save them, but not when they cancelled them when they felt too expensive.

    If I had a lloyds fixed rate mortgage, or if Aviva did them, I wonder if they would allow me to cancel it if rates fell later on?

    15:52 on 14 March 2018

  • gadgetmind2: 

    I don't think there is any point in asking Lloyds given their previous despicable behaviour. What are the changes on any retail or professional investor bailing out an institution ever again by buying these kind of "investments"? The prospectus *cannot* be trusted under any circumstances.

    15:55 on 14 March 2018

  • Frank 1: 

    Agree gadgetmind2, I will never support bailing out a financial institution again. Personally think the ECN robbery was as bad as this pref robbery attempt. Holders swapped to ECNs to do llyods a big favour at the time of near bankcrupcy and got shafted for it. As most of the ECNs were dated the liability was limited for Llyods. Everytime I see the llyods advert , it reminds me theres no honour amongst thieves

    11:06 on 15 March 2018

  • Frank 1: 

    Meant legalised robbery above, albeit that different judges made different verdicts

    11:12 on 15 March 2018

  • anit-spiv: 

    There is every chance this move by Aviva can be quashed due to the negative impact on its reputation such an underhand use of a legal loophole potentially created by the Companies Act 2006 to undermine the protection to preference share holders provided by the prospectus of the Preference shares requiring a vote of just preference share holder for any change in terms and conditions. (Articles 641 and 283)

    This could be stamped out under article 657 which gives the secretary of state powers to change provisions in Chapter 10 to clarify that at an EGM, impacted an individual share class, a majority of any share classes affected by a reduction of capital in line with the prospectuses of the preference shares. You would think such a move would appeal to politicians. The ability to help ten of thousands of voters in a key support group for the Conservatives at no cost to the public purse and to be seen to be standing up for small retail investors against poor and arguably unethical behaviour by a large financial institution. And if the Conservatives don't act a easy way for the opposition parties to condemn the government for not acting in the interests of ordinary people but siding with big business.

    This should become a political issue not just a regulatory and legal one.

    11:12 on 15 March 2018

  • TonyN: 

    If it is indeed quashed or they change their minds what can we do to get recompense for the fall in value of these and other preference shares? Nothing, I suspect.

    A bit like the recent shorting attacks on IQE, it seems there is no recourse against these people, and the public small share, pref and bond holder just gets shafted.

    I was interested to see that the FCA has a consultation paper out on building an excellent financial services industry! I am sure any effort to get involved in that will be a waste of time too, and I have in fact made that my feedback!

    16:09 on 15 March 2018

  • TonyN: 

    gadgetmind2, I entirely agree that it is a waste of time expecting Lloyds to do anything honest and it is probably a waste of time to write to them but bearing in mind the news flow on this issue at the moment it surely can’t do any harm just to remind them of their obligations and maybe even seek a definitive statement. I have not written yet, but will do so probably tomorrow

    16:11 on 15 March 2018

  • andrew moffat: 

    Anit-Spiv, could you kindly explain how the Companies Act undermines preference shareholders?

    Meanwhile, TwentyFour Asset Management's Gary Kirk has warned the insurer it will face higher debt costs in future if it cancels high-yielding preference shares.

    I am very surprised that the ethics Committee of the Stock Exchange has not taken this matter up. Clearly, it undermines the principles involved in holding 'equity'.

    I wonder if the City press will take up the matter. They should and Aviva deserves to be hammered hard in the public domain.

    18:40 on 15 March 2018

  • TonyN: 

    The FCA have said they are investigating and have been in contact with Aviva

    19:35 on 15 March 2018

  • andrew moffat: 

    Thanks TonyN. The more dust everyone can kick up, the better. It is remarkable that an organisation should seek to attract savings from the public whilst simultaneously betraying its own shareholders, some of whom are pensioners. Potentially, Aviva could lose a vast amount of goodwill over this and funds - if the press and others can be mobilised.

    As TwentyFour Asset Management's Gary Kirk has reflected, the corporate governance at Aviva is lacking. The Non Executive Directors should be stimulated into action.

    20:21 on 15 March 2018

  • anit-spiv: 

    There is a measure which allows the cancellation of capital to be voted at EGM which would allow the vote of all shareholders not just preference share holders.

    A botched piece of legislation creating an unforeseen and unintentional loophole that could and should be closed by the Secretary of State who has the powers under article 657 to amend it so that a cancellation of shares would require the support of all shareholders from that class.

    13:20 on 16 March 2018

  • Norman E: 

    Am I right in thinking that the Secretary of State in question is Greg Clark, MP for Tunbridge Wells? If so writing direct to him might be appropriate.

    15:35 on 16 March 2018

  • Norman E: 

    I forgot to say that I am in the neighbouring constituency, but Given the wealthy place Tunbridge Wells is, I am pretty sure a few of his own constituents are holders of these shares. We just need to find them and get them on his case.

    15:38 on 16 March 2018

  • anit-spiv: 

    I would encourage them to do so.

    15:39 on 16 March 2018

  • paul crocker: 

    YES agree we must do all we can is there any one tech savy that can send

    all comments here & some other boards straight to Mark Wilson email & the

    Senior non exce.MP,S & others thanks

    15:51 on 16 March 2018

  • paul crocker: 

    sorry forgot FCA & FOS

    15:53 on 16 March 2018

  • huudi: 

    This is a sure sign that interest rates are staying low, if there was any hope of a decent rise then the share price would have dropped without interference from Aviva.

    They cannot redeem the shares to cancel them but they can just cancel them? It seems they need a smart lawyer to pull that one, and a lot of free lunches. It might be interesting to know who sold prior to this announcement.

    17:05 on 16 March 2018

  • Peter Clery: 

    Write to all the Neds. I have. They could outvote the execs. and certainly should. I have done this via the Chairman's Office. I hope they have the honesty to forward the letters.

    11:59 on 19 March 2018

  • Colin Boylett: 

    I am a retired IFA and holder of a substantial investment in the various Aviva/GA Prefs.

    Aviva's possible redemption is disgraceful, notwithstandfing their interpretation of 'small print'. Many investors will have these Prefs, in a pension portfolio as an alternative to an annuity. The word 'irredeemable' will have been critical to any investment decision. The FCA have been criticised for their refusal to get involved in a similar situation with Lloyds Bank prefs. They will not be able to stand idly by in this instance. Lloyds were a bank. Aviva, the former Norwich Union, have a reputation in the investment industry that goes back centuries. They were a trusted brand. They will not be if this redemption/confiscation goes through. There will be a new investment brand 'AVIVACRAP' which I shall do my utmost to publicise.

    It was open to Aviva to communicate with shareholders. They actually hold some of these shares themselves. What they could have done is written annually to Pref. holders reminding them of what they claim is the situation. Had they done this, it is unlikely that a premium would have arisen as the market would have factored in the stated redemption position. The fact that the market did not, indicates that nearly all investors, including professionals believed 'irredeemable' to mean just that. I have some professional knowledge and have held my Prefs. for years. At no time have I been aware that they could be 'redeemed'. For Aviva to claim that 'cancellation at par' is not 'redemption' is fundamentally dishonest and disingenuous. If they proceed many will consider that they cannot be trusted to abide by the terms of any insurance or investment contract. 'Insure your car with AVIVACRAP. If you have an accident, we will pay out on the assumption that your car was a moped'. 'Want to invest, then do not go to AVIVACRAP because you will get paid in Bitcoin'. I could go on. Let's all agreet hat this is the sort of behaviour one would expect from a bunch of spivs, not a well-respected (hitherto) investment house.

    It was also open to Aviva to add the word 'cancellable' to the price listings. Why did they not do this. The fact is that many holders of these Prefs. did not buy them at issuance when there was a prospectus available. I believe that subsequent buyers were entitled to rely upon the information that Aviva allowed to be published. At no time have I seen anything to underpin their contention that 'irredeemable' does not mean that.

    I urge everybody to get on Twitter or other social media. I can be found there at Baggiesman@sybilsdad

    12:09 on 19 March 2018

  • paul crocker: 


    11:25 on 20 March 2018

  • Peter Clery: 

    Colin, Paul. Exactly. I have written to all the directors and senior execs. saying precisely what you both have outlined. Why not do the same ?

    12:28 on 20 March 2018

  • Peter Clery: 

    2nd message. Colin, Can the Companies Act 2006 really be used to OVERIDE the terms of a prospectus issued prior to that date ?

    12:35 on 20 March 2018

  • andrew moffat: 

    Further to Colin Boylett's message, I have viewed the Annual Report and Accounts for Aviva 2016 - the last available, pending publication of the most recent report.

    Note the reference to the 2006 Companies Act in the General Accident Annual Report.

    Note, also, in the Aviva Report, the reference to 'fair value'. This, of course, is at the crux of the matter. 'Fair Value' was the prevailing price before this controversy arose.

    Investors have a right to be guided by the information in the Annual Reports but, given these are 'irrededeemable' within the title, it is reasonable to assume that any attempt to cancel the shares at £1.00 would be a breach of faith with investors.

    Clearly, there are legal issues involved here but the market clearly took the view that there would be no repayment at par, ie £1.00/share.

    This is clearly a matter for the Non Executive Directors, whose task is to oversee the interests of shareholders, over and above the strategy of the company.

    Page 202 Annual Report and Account 2016

    33 – Preference share capital

    This note gives details of Aviva plc’s preference share capital.

    The preference share capital of the Company at 31 December was:





    Issued and paid up

    100,000,000 8.375% cumulative irredeemable preference shares of £1 each 100 100

    100,000,000 8.75% cumulative irredeemable preference shares of £1 each 100 100

    200 200

    The issued preference shares are non-voting except where their dividends are in arrears, on a winding up or where their rights are


    On a winding up, they carry a preferential right of return of capital ahead of the ordinary shares. Holders are entitled to receive

    dividends out of the profits available for distribution and resolved to be distributed in priority to the payment of dividends to

    holders of ordinary shares. The Company does not have a contractual obligation to deliver cash or other financial assets to the

    preference shareholders and therefore the directors may make dividend payments at their discretion.

    At the end of 2016 the fair value of Aviva plc’s preference share capital was £280 million (2015: £278 million).

    Page 316

    • Cumulative irredeemable preference shares of £1 each, which entitle holders to attend and vote at general meetings only when

    dividends on such shares are in arrears. Cumulative irredeemable preference shareholders may also attend general meetings and

    vote on particular proposals when such proposals relate to an alteration of the rights attaching to such shares, a reduction of

    capital (other than through a redemption or repurchase of shares) or a winding up of business. On a winding up, they carry a

    preferential right of return of capital ahead of the ordinary shares

    General Accident Annual Report 2017 Page 22

    The Company’s cumulative irredeemable preference shares are listed on the London Stock Exchange under a Standard Listing.

    They are irredeemable but, subject to the provisions of the Companies Act 2006, the Company may at any time purchase any

    preference shares at either par or on the prevailing market price upon such terms as the Board shall determine.

    The cumulative irredeemable preference shares rank, as to payment of a dividend and capital, ahead of the Company’s ordinary

    share capital. The issued preference shares are non-voting except where their dividends are in arrears, on a winding up or where

    their rights are altered. On a winding up, they carry a preferential right of return of capital ahead of the ordinary shares. The

    Company does not have a contractual obligation to deliver cash or other financial assets to the preference shareholders, and

    therefore the directors may make dividend payments at their discretion.

    12:55 on 20 March 2018

  • Peter Clery: 

    Thank you Andrew. On your data, can we assume that the fair value of the prefs . at the end of 2016 was an average of 140p ? The 2017 accounts will show the figure for end 2017. We must force AVIVA to take notice. Regards, Peter.

    13:05 on 20 March 2018

  • andrew moffat: 

    Colin Boylett, I cannot email you as the postmaster says your email is not accepting new messages.

    I have repeated, below, the text of my email which would not send.

    Peter Clery, you could be correct - 140p sounds about right. However, the price rose considerably since that point and the market price is generally fair value - ie the value before this controversy arose.

    Rgds, A.

    Dear Colin Boylett,

    I noticed your email on the Citywire comments' section, re Aviva.

    I hold General Accident Irr Cum Pref and, in addition, Aviva ord.

    Mark Tabar (institutional shareholders) has set up a help-line for Pref Shareholders, which you can find here:


    I have replied, just now, to your contribution to Citywire (Comments) with extracts from the Annual Reports of Aviva and General Accident (owned by Aviva).

    It seems the argument hinges on legal matters and, not least, the Companies Act 2006.

    However, there would also appear to be a conflict of interest: the Directors have one eye on their bonus. If they hobble their own shareholders, they can raise the profitability of the company at our expense and, probably, their bonuses are tied to profitability. There is, however, another issue and that refers to propriety of conduct. How can a savings' institution parade itself as an honest and trustworthy organisation if it seeks to undermine its own savers in its own company? It is quite remarkable this is even being discussed.

    Kind regards

    Andrew Moffat

    13:15 on 20 March 2018

  • andrew moffat: 

    Colin Boylett, I cannot email you as the postmaster says your email is not accepting new messages.

    I have repeated, below, the text of my email which would not send.

    Peter Clery, you could be correct - 140p sounds about right. However, the price rose considerably since that point and the market price is generally fair value - ie the value before this controversy arose.

    Rgds, A.

    Dear Colin Boylett,

    I noticed your email on the Citywire comments' section, re Aviva.

    I hold General Accident Irr Cum Pref and, in addition, Aviva ord.

    Mark Tabar (institutional shareholders) has set up a help-line for Pref Shareholders, which you can find here:


    I have replied, just now, to your contribution to Citywire (Comments) with extracts from the Annual Reports of Aviva and General Accident (owned by Aviva).

    It seems the argument hinges on legal matters and, not least, the Companies Act 2006.

    However, there would also appear to be a conflict of interest: the Directors have one eye on their bonus. If they hobble their own shareholders, they can raise the profitability of the company at our expense and, probably, their bonuses are tied to profitability. There is, however, another issue and that refers to propriety of conduct. How can a savings' institution parade itself as an honest and trustworthy organisation if it seeks to undermine its own savers in its own company? It is quite remarkable this is even being discussed.

    Kind regards

    Andrew Moffat

    13:15 on 20 March 2018

  • Peter Clery: 

    Keep the pressure on all the main board directors and senior executives by letter &email.. Our exchanges here are valuable and interesting but we must influence the board directly to get the result that is needed. Repayment at the price ruling before the announcement. This move might do something, though not a lo,t to redeem the company's reputation for probity. Regards, Peter Clery

    14:18 on 20 March 2018

  • Colin Boylett: 

    To those who have commented, many thanks. I'm out a lot at the moment.

    My e-mail is cjboylett@btinternet.com

    Mark Taber was very helpful in getting a large chunk of Bradford & Bingley bond money back some years ago after the government nationalised it.I would urge everyone to be active - letters to MPs, the financial pages etc.in the hopes that we can get Aviva to back down. As pointed out they have effectively pooped over the whole sector which is disgraceful. If we can create enough stink they may shelve the idea.

    17:03 on 20 March 2018

  • philip baker: 

    The Villain was on CNBC this morning, still not prepared to back down but they did not grill him very much, would have been good to have Mark Taber or a pref holder on as well to challenge the guy. ( I want to use stronger words but will leave those to your imagination).

    For moral support I can be found at philbaker5566@hotmail.com not sure what I am going to do but Aviva have destroyed any future up lift in the price of these shares, if they do not cancel or redeem they will always have the threat hanging over them. My last purchase of GACA was at 170 giving a 5% yield. At 120 I will have recouped my loss if they do not redeem for 7 years.

    My retirement plans are up in the air, I should have reminded myself not to put too many eggs in one basket.

    I thought Aviva was a big save company and on that basis thought I had bought save irredeemable shares that would see me out. Oops half my pension income is from GACA and GACB.

    If Corbyn nationalises my utilities I will be reliant on the state.

    I should have bought an income investment trust and not tried to be clever.

    17:39 on 20 March 2018

  • gadgetmind2: 

    If pensioners can't buy shares in Aviva for a long and happy retirement then what can they do? Complete and total betrayal of trust, and they should hang their heads in shame (but won't as they don't have any shame.)

    18:44 on 20 March 2018

  • Ramji via mobile

    Can anyone one remember the Robert Maxwell the person got away with pension pot? then most pension company were reaiding and most people lost out.

    If any one let get away the Aviva then what other institutions to start doing the same

    18:50 on 20 March 2018

  • paul crocker: 

    Some marvellous posts here. I used 2 be a dealer on S.Ex. just some thoughts as they come market wise apologies if they have already been made.

    Unbelievable that a FTSE 100 insurance co.!!!could make this cock up.

    IRRED means never redeemable/cancelled even if highly paid ceo, dirs,lawyers, advisers try to make some clever wheeze up i think in court it will not stick never mind morally.

    Problem is as i hold ord, av irr & gen plus many other fixed inc. stocks we are shooting ourselves in the foot.

    I would imagine lots of holders have no idea what is happening.

    On my brokers website there has never ever been any news items for IRR,s.

    The statement was only noticed by a few fund managers they had the chance

    to sell or short private clients did not have this news.

    This could be a problem some posts have suggested it was released to push prices down this could be called market manipulation as it was not released to shareholders it caused a false & disorderly market & wiped many thousands

    off the value of our holdings as they fell up to 30% & created a false market in all fixed int stocks wiping up to £1bn off the value of F.I.market on LSE which may never recover.

    Would they be redeeming if price 50p?will they redeem ord @ nom. value?

    What about poor investors that PAID 170P only a few days ago?

    I think our only chance is Mark Taber I would be the first to pay into a fund.

    As u can see i am not good on computer & i am only on email! taken a long time to do this note 1 finger! has anyone contacted M.T. with this idea?

    Also we all need to contact LSE regarding share holders not having the state ment & it causeing the false & disorderly market in our & all F.I.stocks this could be crucial.!!

    It is not only about our money it is wrong & it is the principle thanks


    19:15 on 20 March 2018

  • Don Busby: 

    I suggest two propitious ways by which Aviva might pay down its preference share debts.

    1. Declare a date, say 5 years hence, when shares would be redeemed at par.

    2. At 1 year intervals over 5 years, redeem one fifth of holdings at market value by a 4 for 5 issue, then a 3 for 4 issue and so on, down to a 0 for 1 'cancellation'.

    I do not pretend to understand the intricacies of what I suggest, but believe either course would allow for an orderly market y

    10:03 on 21 March 2018

  • paul crocker: 

    There seems to be a time lag between comment & post.

    just spoken to Nicky Morgan MP Treasury office to register complaint

    020 7219 5769 & have spoken to my MP. Article in Times today. Can,t seem to get thru to aviva by phone

    nor email as i have said not good with tech. Can all these comments here be sent to the correct people to have some affect?

    17:27 on 21 March 2018

  • Don Busby: 

    I have posted two comments earlier today but can find no trace of these.

    Advice please.

    Don Busby

    A new contributor.

    22:13 on 21 March 2018

  • huudi: 

    What we have is a share buyback(a dodgy practise used to slow a declining price) with a difference, ie: they don't pay.

    Henceforth to be known as a share stealback.

    Their savings would seem to be minimal, penny-pinching & they have the gall to say its part of a plan to RETURN value to shareholders?

    07:49 on 22 March 2018

  • Norman E: 

    Reported this morning that Aviva are backing down, but no move in the prices this morning as yet. Anyone have real news?

    09:18 on 23 March 2018

  • anit-spiv: 

    Aviva have put out an RNS. Game over.

    09:20 on 23 March 2018

  • Peter Clery: 

    We won. Well done us.

    09:41 on 23 March 2018

  • anit-spiv: 

    Yes in regards to Aviva but government now needs to act to ensure no one can attempt this again. So the lobbying may not need to stop now. Potential loopholes undermining minority share holder rights need to be closed now.

    09:53 on 23 March 2018

  • Norman E: 

    This is the quote from Mark Wilson:

    "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."

    Perhaps he should have said was and not is in the first sentence because a lot of reputational damage has been done. Nevertheless it is good news and I suspect that Aviva will buy up preference shares in the market, probably after waiting for some interest rate rises from the Bank of England.

    09:55 on 23 March 2018

  • Peter Clery: 

    I think that if they were to buy in the market at less than the pre announcement price, they would be guilty of benefiting from market manipulation - a criminal offence.

    09:58 on 23 March 2018

  • andrew moffat: 

    Not quite over yet. There are one or two points out of all of this. First, as anit-spiv observes, the regulators and government must learn from this and seek to prevent any repeat. Secondly, there are those unfortunate investors who sold out, for fear that their investment would be 'redeemed' at par. Thirdly, Mark Wilson cannot escape quite so easily; there is a question of his judgement and it can be argued that Wilson should now go for the distress and difficulty he has caused.

    Finally, we all owe a vote of thanks to Mark Taber and other sterling institutional managers who have taken up cudgels on behalf of shareholders.

    10:04 on 23 March 2018

  • Frank 1: 

    Another Knighthood for Mark Taber

    10:09 on 23 March 2018

  • paul crocker: 


    10:11 on 23 March 2018

  • Peter Clery: 

    Agreed the above but I think Thomas Stoddard should be the first to go. I am sure that he will have dreamed up the scheme. Such talents are best left out of future Aviva management.

    10:12 on 23 March 2018

  • paul crocker: 

    PS AGREE THIS IS NOT THE END 4 !!!!!!!!!!!!!!!! THEM !!!!!!!!!!!!!!!

    10:15 on 23 March 2018

  • Colin Boylett: 

    Some prefs. holders may well have sold as a result of this fiasco. I would suggest that they quantify their losses and make formal claims to Aviva for recompense. If that does not elicit a satisfactory response, then a formal complaint to the FCA may be warranted. It is not beyond the bounds of possibility that some holders had heart attacks or, even contemplated suicide, upon hearing the news of the proposed cancellation. Unintended consequences of such a hamfisted strategy. Heads need to roll at Aviva.

    11:58 on 23 March 2018

  • gadgetmind2: 

    Yes, this door needs closing. Aviva may have backed down, but the like of Lloyds are total slime and are bound to be sniffing around to see if they could pull this off. The Lloyds prefs recovered a little today but aren't back anywhere near previous levels.

    12:31 on 23 March 2018

  • huudi: 

    Cancelled the car insurance, that frit em!

    It would have been better to have had the courts give a cast-iron decision.

    13:42 on 23 March 2018

  • Norman E: 

    Prices have not recovered fully. My Halifax share dealing account shows 8.375% prefs at 142.5% and 8.75% at 152.5, with General Accident 8.875% at 154.10, all well below the prices before this saga started. Does this mean that the market does not Trust Aviva to keep its word?

    16:53 on 23 March 2018

  • huudi: 

    Norman E, as it has not been to court the threat hangs over all prefs, they or another could try later. The price will also be down with the promise of higher interest rates but that's 'same old, same old....'

    Do the sums, if its a good return perhaps buy more? after that apology I doubt Aviva will try again, but doubt there is.

    18:43 on 23 March 2018

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