Preference shares

Aviva plc and General Accident plc preference shares

Update on goodwill payment scheme - 1 June 2018

On 30 April 2018 we made an announcement regarding a discretionary goodwill payment to shareholders who sold our preference shares* in the period from 8 to 22 March 2018 (inclusive).  

KPMG LLP, as administrator of the scheme, has started contacting certain brokers and intermediaries who executed transactions on behalf of eligible shareholders during this period to facilitate the collection of information allowing these brokers and intermediaries to submit claims on behalf of those eligible shareholders when the scheme opens.

If you are an eligible shareholder who sold preference shares via a broker or other intermediary, they may be in touch regarding this process and to collate certain information required to make a claim, ahead of the scheme opening.

We have updated the questions and answers below to reflect this process and to provide additional information on the terms and conditions of the scheme. Read the full terms and conditions of the scheme.

We expect to have finalised the preparations required to open the scheme by 31 July 2018 and will issue a further announcement at that time.

When the scheme opens, we will also make further updates to the information available on this website and KPMG LLP will 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)

Announcement of goodwill payment - 30 April 2018

Read the announcement we made on 30 April 2018 regarding a discretionary goodwill payment  to shareholders who sold  our preference shares in the period from 8 to 22 March 2018 (inclusive).  

Questions and answers about our discretionary goodwill payment

These questions and answers will be updated over time as we finalise the process. 



Eligible shareholders will be those who were the beneficial owners of the following 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):

  • Aviva plc 8.375% preference shares (GB0002114154)
  • Aviva plc 8.750% preference shares (GB0002124963)
  • General Accident plc 7.875% preference shares (GB0003692513)
  • General Accident plc 8.875% preference shares (GB0003692737)

 

We have appointed KPMG as an independent administrator to handle the goodwill payment claims and payment process. There will be two methods to submit and agree a claim in the scheme:

a)  Intermediaries or brokers can submit and agree a claim with KPMG on behalf of their clients who are eligible shareholders; or

b)  Those who were the beneficial owners of the preference shares can submit and agree a claim directly with KPMG after the Scheme Commencement Date. A further announcement will be made on the Scheme Commencement Date, which we expect will be by 31 July 2018.

KPMG is liaising with certain intermediaries and brokers to assist them in gathering information to allow them to enter claims under option a) above. KPMG, who have good experience of similar processes, expects that this will provide the smoothest and most efficient claim process for all parties. Therefore, if you intend to make a claim in the goodwill payment scheme and an offer is forthcoming from your broker or intermediary to claim on your behalf, we encourage you to consider taking it.

If you are not contacted by your broker or intermediary, or you decide to claim directly, you will be able to enter a claim under option b) above.

KPMG will be writing to all registered holders of preference shares who have been identified as potentially having a claim (or having underlying clients who may have a claim), on our behalf, upon the opening of the goodwill scheme.

 

KPMG is communicating with brokers now to invite them to begin gathering the information required to submit claims on behalf of their clients (where they are eligible shareholders) when the goodwill payment scheme opens.

If a broker or intermediary intends to submit a claim on behalf of their clients, KPMG will require information on these claims ahead of the goodwill payment scheme launch. This will help avoid confusion and any duplication of claims. If you wish to make a claim in the goodwill payment scheme and your broker or intermediary contacts you seeking authority to claim on your behalf, we would suggest you consider authorising your broker or intermediary as it should simplify the process for you.

 

KPMG is liaising with certain brokers and nominees who executed transactions during the Relevant Period to assist them in gathering information to enable them to submit and agree claims on behalf of their clients who are eligible shareholders when the scheme opens. KPMG, who has good experience of similar processes, expects that this will provide the smoothest and most efficient claims process for all parties. Therefore, if you intend to make a claim in the goodwill payment scheme and an offer is forthcoming from your broker or intermediary to submit a claim on your behalf, we encourage you to consider taking it.

If you are not contacted by your broker or intermediary, or you decide to claim directly, you will be able to enter a claim with KPMG. We will provide full details on the process for eligible shareholders to submit a claim for a goodwill payment directly once we have completed the preparations required to open and operate the scheme (which we expect to be by 31 July 2018). 

 

KPMG has contacted certain brokers and intermediaries to invite them to facilitate the claims process on behalf of their clients. This will involve the broker or intermediary providing KPMG with your details and the details of your claim. To do this the broker or intermediary will need to gather the relevant information and seek the authority of their clients to provide these details to KPMG prior to the scheme opening. KPMG expects that having this process facilitated by brokers and intermediaries, where possible, will result in a quicker and smoother claims process for these claimants following the opening of goodwill payment scheme.

Any goodwill payments made in respect of claims submitted and agreed by brokers or intermediaries on behalf of clients will be paid to the broker or intermediary.

If your broker or intermediary does not submit a claim on your behalf and you believe you are eligible to claim, you will be able to submit a claim directly when the scheme opens. We expect the scheme to open by 31 July 2018 and will issue a further announcement at that time.  Read the full terms and conditions of the scheme


There is no new material information in the communications to brokers, and we are therefore not issuing a market announcement. We remain on track to launch the goodwill payment scheme by the end of July as previously announced and at that point we will issue a further market announcement.


Aviva is voluntarily launching the goodwill payment scheme because we believe that it is the right thing to do.

We recognise that the announcement on 8 March 2018 caused some uncertainty as to whether we would seek to cancel the preference shares at par value (a course of action which we later decided against adopting) and that this uncertainty caused a drop in the market price of the preference shares. 

In this context, a discretionary one-off goodwill payment will be offered to shareholders who sold their preference shares in the period from 8 to 22 March 2018 (inclusive) (the “Relevant Period”) at a share price that was lower than the price that the preference shares returned to following our announcement on 23 March 2018. The goodwill payment is intended to put those shareholders who sold during the Relevant Period in the same financial position they would have been in had they sold their preference shares following the 23 March announcement.

We believe that taking this step will further restore investors’ trust in Aviva, which is in the interests of all of our stakeholders.


No. This is entirely voluntary. 

We are confident that Aviva has at all times behaved appropriately in relation to the announcements made about the preference shares, and that there is no legal obligation for Aviva to compensate those shareholders who sold preference shares during the relevant period. 


We expect to have completed the preparations required to open and operate the goodwill payment scheme by 31 July 2018. A further announcement will be made at that time setting out full details of how eligible shareholders who intend to claim directly may then claim their payment, including the anticipated timetable for making a claim and receiving payment. Certain brokers and intermediaries may be contacting their clients who are eligible shareholders and gathering claim information ahead of the opening of the scheme.


Eligible shareholders will have up to six months to make a claim from the date the goodwill payment scheme opens.

 

For each eligible shareholder who accepts the offer of a goodwill payment, the amount of the goodwill payment will be calculated as the sum of (i) the Net Basic Goodwill Amount, (ii) any Transaction Costs and (iii) the Additional Amount. 

The “Net Basic Goodwill Amount” will be calculated as the aggregate “Loss” incurred on sales of preference shares during the Relevant Period less the aggregate of any “Gains” made on investments in preference shares during the Relevant Period.

Loss” means:

  • Aviva plc 8.375% preference shares:  the amount by which 150.81p exceeds the price at which the preference shares were sold during the Relevant Period
  • Aviva plc 8.750% preference shares:  the amount by which 158.02p exceeds the price at which the preference shares were sold during the Relevant Period
  • General Accident plc 7.875% preference shares:  the amount by which 140.01p exceeds the price at which the preference shares were sold during the Relevant Period
  • General Accident plc 8.875% preference shares:  the amount by which 157.42p exceeds the price at which the preference shares were sold during the Relevant Period

Gain” means:

  • Aviva plc 8.375% preference shares:  the amount by which 150.81p exceeds the price at which the preference shares were bought during the Relevant Period
  • Aviva plc 8.750% preference shares:  the amount by which 158.02p exceeds the price at which the preference shares were bought during the Relevant Period
  • General Accident plc 7.875% preference shares:  the amount by which 140.01p exceeds the price at which the preference shares were bought during the Relevant Period
  • General Accident plc 8.875% preference shares:  the amount by which 157.42p exceeds the price at which the preference shares were bought during the Relevant Period.

Transaction Costs” are any third party dealing or other transaction costs specifically incurred in respect of the sale of preference shares by an eligible shareholder (excluding any account fees or other fees of a general nature). Any goodwill payment in respect of third party transaction costs will be limited to 50% of the Net Basic Goodwill Amount.

The “Additional Amount” is intended as a notional investment yield to recognise that if investors had received the Net Basic Goodwill Amount on 23 March 2018 they would have had the opportunity to re-invest it for income.  The Additional Amount will be calculated by applying a rate of 6% per annum to the sum of the Net Basic Goodwill Amount and the Transaction Costs for the period from 23 March 2018 to the date that is three months after the launch of the goodwill payment scheme (inclusive).  It is expected that tax will in some cases have to be withheld from this element of the goodwill payment.

 


The goodwill payment is intended to put eligible shareholders in the same financial position they would have been in had they sold their preference shares following the 23 March 2018 announcement, rather than during the Relevant Period. Following the 23 March 2018 announcement, the price of the preference shares settled at a price which reflects the market’s understanding of the terms of the preference shares and Aviva’s current plans.

The Net Basic Goodwill Amount will therefore be determined by calculating the aggregate “Loss” incurred on sales of preference shares during the Relevant Period less the aggregate “Gain” on any investments in preference shares during the Relevant Period.

The “Loss” is the amount by which the volume weighted average price of the relevant series of preference shares over the 5 business days from (and including) 23 March 2018 exceeded the sale price for that shareholder’s preference shares. The “Gain” is the amount by which the volume weighted average price of the relevant series of preference shares over the 5 business days from (and including) 23 March 2018 exceeded the purchase price for preference shares purchased by an eligible shareholder during the Relevant Period.

The Net Basic Goodwill Amount will be increased by any third party dealing or other transaction costs specifically incurred in respect of the sale of eligible shareholders’ preference shares (excluding any account fees or other fees of a general nature).  That total amount will be increased further by an Additional Amount intended to reflect a notional investment yield in recognition of the fact that had an eligible shareholder sold its preference shares on 23 March 2018 at the normalised share price that shareholder would have been able to invest the full amount of the proceeds of sale at that time for income. 

The Additional Amount will be calculated by applying a rate of 6% per annum to the aggregate of the Net Basic Goodwill Amount and applicable transaction costs for the period from the 23 March 2018 announcement to the date that is three months after the launch of the goodwill payment scheme.  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. 


Eligible shareholders may claim an amount equal to third party transaction costs (e.g. broker commission) specifically incurred in respect of the sale of preference shares (excluding any account fees or other fees of a general nature).  Any goodwill payment in respect of third party transaction costs will be limited to 50% of the Net Basic Goodwill Amount.


No.  Aviva is not offering to compensate investors for any tax that may have become payable as a result of the investor disposing of their preference shares (whether as a result of the investor benefitting from a capital gain or otherwise).  


Eligible shareholders will need to take their own advice on the tax treatment applicable to receipt of the goodwill payment.  However, Aviva has discussed the proposed payment with HMRC and, based on these preliminary discussions, understands that the Net Basic Goodwill Payment and the Transaction Costs should be characterised as capital for UK tax resident recipients and the Additional Amount should be characterised as income for UK tax resident recipients. 


Based on the information currently available, Aviva estimates that goodwill payments will be paid out to up to 2,000 individual preference shareholders and that the total cost of the goodwill payment scheme should not exceed approximately £14 million.

However, we are continuing to obtain and analyse trading data for the relevant period, and it will only be possible to ascertain for certain how many shareholders will be eligible to receive a goodwill payment and the level of uptake from preference shareholders, and therefore the total amount that will be paid under the scheme, at the end of the claims period for the scheme. 

 

The goodwill payment scheme is designed for those shareholders who sold their preference shares during the Relevant Period because they received a sale price that was lower than the price that the preference shares returned to following our announcement on 23 March 2018. The goodwill payment is therefore intended to put those eligible shareholders into the same position they would have been in had they sold their preference shares following the 23 March 2018 announcement.

Aviva is offering the goodwill payment to those shareholders as a discretionary gesture in recognition of the fact that our first announcement on 8 March 2018 led to uncertainty as to whether we would seek to cancel the preference shares at par value (a course of action which we later decided against adopting) which may have caused some shareholders to sell their preference shares. This applies to relatively few shareholders; other shareholders did not take any action in respect of their preference shares whilst awaiting Aviva’s final decision and, following the 23 March 2018 announcement, the price of the preference shares settled at a price which reflects the market’s understanding of the terms of the preference shares and Aviva’s current plans. 


We have appointed KPMG as an independent administrator to handle the goodwill payment process. KPMG will determine whether or not shareholders are eligible for a goodwill payment and, if so, will calculate the amount of the goodwill payment that will be offered to each eligible shareholder. Full details of the process for submitting a claim and accepting a goodwill payment will be announced once we have completed the preparations required to open and operate the scheme, which we expect to be by 31 July 2018. 


We expect to have completed the preparations required to open and operate the goodwill payment scheme by 31 July 2018. A further announcement will be made at that time setting out full details of how eligible shareholders who are claiming directly may then claim their payment, including the anticipated timetable for submitting a claim to the scheme administrator. Once a claim is agreed and a properly executed release has been received by KPMG, they will seek to make the relevant goodwill payment within 28 days. Brokers and intermediaries who are submitting claims on behalf of their clients may be collating the required information ahead of the scheme opening.


Yes, if you are an eligible shareholder and wish to accept any offer of a goodwill payment, you will be required to sign a release. If you authorise your broker or intermediary to make a claim on your behalf, you will need to provide them with the authority to enter this release on your behalf. In broad terms, this will release Aviva and any member of the Aviva group from claims in relation to the preference shares (including any claims arising out of or in any way connected with our announcements on 8 March 2018 and 23 March 2018), other than any claims arising out of any material new information that was not publicly disclosed (for example, any enforcement action by the FCA). It will also release KPMG, Aviva and GA in relation to the administration of the goodwill payment scheme. A copy of the full release is available here.


KPMG has been appointed as an independent administrator to handle the goodwill payment process.  KPMG will determine whether or not shareholders are eligible for a goodwill payment and, if so, will calculate the amount of the goodwill payment that will be offered to each eligible shareholder.  We want the goodwill scheme process to run as smoothly as possible and KPMG have good experience in handling similar processes.

 


Preference shares remain an industry issue and we will be seeking to work with regulators and the industry to identify a market-wide solution before the 2026 deadline when, under the current regulatory environment, all shares of this nature will cease to count as regulatory capital.

Aviva is hoping to work towards obtaining regulatory approval for the preference shares, or a suitable substitute, to qualify as capital from 2026. If as we approach 2026 Aviva needs to reconsider this position, we will do so after taking into account the fair market value of the preference shares at that time. 

Statement - issued 23 March 2018

On 23 March 2018 we issued a statement confirming that we would take no action to cancel our preference shares.  You can read this announcement in our Newsroom.

Frequently Asked Questions - 23 March 2018:

  • We have announced that we have decided to take no action to cancel the preference shares.  You will continue to hold the preference shares on their existing terms.
  • 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.
  • If you have any further questions, please contact your financial adviser or broker.
  • Since the full year results announcement on 8 March 2018 we have heard a wide range of views on our preference shares, have spoken to a large number of investors and received strong feedback and criticism.  As a result we have listened.
  • The reputation of Aviva, and the trust people have in us, is paramount.
  • We hope our decision today goes someway in restoring that trust.
  • Yes.  No changes are being made or have been made to the terms of the preference shares.  Preference shareholders can continue to enjoy the rights attached to those shares on their current terms, including the right to dividend. 
  • As we have explained in our statement, we have decided to take no action to cancel the preference shares.  You will continue to hold the preference shares on their existing terms.
  • 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.
  • If, as we approach 2026, Aviva needs to reconsider its position we would make shareholders aware via a market announcement.
  • Our announcement today means that preference shareholders can rest secure in their holdings. 

If you require any help or further information the Statement on Preference Shares (23 March 2018), please contact Aviva’s Registrar, Computershare Investor Services PLC using the contact details below:

  • By telephone: 0371 495 0105.  Lines are open Monday to Friday, 0830hrs to 1730hrs UK time, excluding public holidays. Please call +44 117 378 8361 if calling from outside the UK.
  • By email: AvivaSHARES@computershare.co.uk 
  • Online: www.computershare.co.uk/contactus
  • In writing: Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ, United Kingdom

Statement - issued 15 March 2018

Please note that our statement on 15 March 2018 regarding our preference shares was superceded by our statement on 23 March 2018 which confirmed that we would take no action to cancel our preference shares.

  • In the announcement of Aviva plc’s (“Aviva” or “we”) 2017 full year results on 8 March 2018 we signalled our intention to reduce hybrid debt by £900 million and that we were targeting more than £500 million in additional capital returns, incorporating liability management and returns to shareholders, and that we were considering our alternatives for doing so. We noted in this regard that we have the ability to cancel the Aviva and General Accident plc (“GA”) preference shares at par value (plus accrued interest, arrears and in the case of GA plc, issue premium). GA made a similar announcement on the same day.
  • We have received a number of questions regarding the reference made in the announcements to the ability to cancel the preference shares issued by Aviva and GA  through a court approved reduction of capital, subject to the approval of the relevant issuer's ordinary and preference shareholders voting together.
  • In response to these queries we are providing investors with a more detailed explanation of the mechanism through which the preference shares may, with Court and shareholder approval, be cancelled following a reduction of capital.  This is one of a number of methods by which preference shares such as these can be retired.
  • Neither this document nor the additional information provided should be taken as a statement of the Company’s intent either with respect to any decision to return capital on the preference shares, the mechanism of cancellation or the amount per preference share to be returned, and no inference of such intention should be made.   No decision has yet been taken. If and when a decision is taken, we will make the appropriate market announcements.
  • As noted in our announcement on the 8 March 2018 we and GA are evaluating the available alternatives, including how to balance the interests of ordinary and preferred shareholders.
  • Preference shareholders should consult their broker or financial adviser on what steps, if any, they should take as a result of this document.
  • If you require any help or further information regarding your shareholding, please contact Aviva’s Registrar, Computershare Investor Services PLC using the contact details below:
    • By telephone: 0371 495 0105.  Lines are open Monday to Friday, 0830hrs to 1730hrs UK time, excluding public holidays. Please call +44 117 378 8361 if calling from outside the UK.
    • By email: AvivaSHARES@computershare.co.uk 
    • Online: www.computershare.co.uk/contactus
    • In writing: Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ, United Kingdom