Dividend Payments Paused by Insurance Companies

Some insurance companies have made the decision not to pay out dividends to their shareholders due to the COVID-19 crisis.

Financial regulators had urged insurers to pause payouts due to the uncertainty caused by the pandemic.

The Prudential Regulation Authority (PRA) described the decision made by Aviva, Direct Line, Hiscox, and RSA, as ‘prudent’.

"Insurers should pay close attention to the need to protect policyholders and maintain safety and soundness," said the PRA.

"Decisions regarding capital or significant risk management issues need to be informed by a range of scenarios, including very severe ones”.

The Bank of England asked insurers and banks to hold on to their cash reserves during the crisis instead of paying them out as dividends, as the funds could be needed down the line.

A total of £15.6bn was held back by Barclays, HSBC, LLoyds, Royal Bank of Scotland, and Standard Chartered which had been earmarked as payments to shareholders.

Similarly, millions had been held back by the decision taken by insurers on Wednesday. Aviva had intended to pay an annual dividend of 30.9p per share, whereas Direct Line and RSA had announced dividends of 21.6p and 23.1p respectively.

Not all insurers have decided to scrap their dividend payments. Legal & General has decided to ignore the Bank of England’s plea and announced that it will still pay out its planned dividend for 2019.

William Ryder, an equity analyst at Hargreaves Lansdown, said: "The regulator is clearly very keen for insurers to retain capital going into the next few months, and given the number of dividend cuts this morning we suspect some last minute pressure was applied to bring the industry to heel”.

The insurers that made the decision to pause dividend payments all assure investors that they have strong capital positions.

A statement from Aviva said: "The Board has taken this decision in the wake of the unprecedented challenges COVID-19 presents for businesses, households and customers, and the adverse and highly uncertain impact on the global economy."

Chairman of RSA, Martin Scicluna, said: "This is a difficult decision, not least in terms of the initial impact it will have on shareholders.

Some insurance companies have made the decision not to pay out dividends to their shareholders due to the COVID-19 crisis.

Financial regulators had urged insurers to pause payouts due to the uncertainty caused by the pandemic.

The Prudential Regulation Authority (PRA) described the decision made by Aviva, Direct Line, Hiscox, and RSA, as ‘prudent’.

"Insurers should pay close attention to the need to protect policyholders and maintain safety and soundness," said the PRA.

"Decisions regarding capital or significant risk management issues need to be informed by a range of scenarios, including very severe ones”.

The Bank of England asked insurers and banks to hold on to their cash reserves during the crisis instead of paying them out as dividends, as the funds could be needed down the line.

A total of £15.6bn was held back by Barclays, HSBC, LLoyds, Royal Bank of Scotland, and Standard Chartered which had been earmarked as payments to shareholders.

Similarly, millions had been held back by the decision taken by insurers on Wednesday. Aviva had intended to pay an annual dividend of 30.9p per share, whereas Direct Line and RSA had announced dividends of 21.6p and 23.1p respectively.

Not all insurers have decided to scrap their dividend payments. Legal & General has decided to ignore the Bank of England’s plea and announced that it will still pay out its planned dividend for 2019.

William Ryder, an equity analyst at Hargreaves Lansdown, said: "The regulator is clearly very keen for insurers to retain capital going into the next few months, and given the number of dividend cuts this morning we suspect some last minute pressure was applied to bring the industry to heel”.

The insurers that made the decision to pause dividend payments all assure investors that they have strong capital positions.

A statement from Aviva said: "The Board has taken this decision in the wake of the unprecedented challenges COVID-19 presents for businesses, households and customers, and the adverse and highly uncertain impact on the global economy."

Chairman of RSA, Martin Scicluna, said: "This is a difficult decision, not least in terms of the initial impact it will have on shareholders.

"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.”

"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.”