(Adds details, quotes)
By Sinead Cruise and Muvija M
LONDON, April 8 (Reuters) - A slew of British insurers
pressed pause on hundreds of millions of pounds of dividends on
Wednesday, in moves welcomed by the Bank of England, which had
cautioned the sector to the risk of heavy costs from the spread
of the coronavirus.
Aviva, Direct Line, RSA and Lloyds
of London member Hiscox all said they would
halt their 2019 investor payouts in view of the highly uncertain
toll the Covid-19 pandemic would likely wreak on their
businesses, customers and the global economy.
"This is a difficult decision, not least in terms of the
initial impact it will have on shareholders," RSA Chairman
Martin Scicluna said.
"No company exists in a vacuum and at this time we judge it
to be in the best long term interests of RSA to show forbearance
on dividends and maximise our capability to support customers
under the terms of their respective policies and play our part
in industry initiatives to support relief efforts."
Regulatory authorities including EIOPA and Britain's
Prudential Regulation Authority had earlier urged restraint on
dividend payments by insurers to shareholders and the payment of
bonuses to senior staff.
The moves come just over a week since the PRA asked all
major UK banks to suspend dividends.
"When insurers are considering whether or not to proceed
with any dividend payments, their boards should pay close
attention to the need to protect policy holders and maintain
safety and soundness," the BoE said in a statement.
"Decisions regarding capital or significant risk management
issues need to be informed by a range of scenarios, including
very severe ones," it added.
Aviva also said it would review all material company
spending as part of plans to insulate its business from the
economic fallout of the coronavirus pandemic.
The company said it remained "well capitalised with strong
liquidity" and retention of the final dividend would boost group
capital ratio by around 7% to approximately 182%.
Britain's biggest motor insurer Direct Line said it would
make no changes to staffing until at least the autumn as it
weighs the damage the coronavirus shutdowns has had on the
insurance industry.
Separately, Hiscox, which underwrites a range of risks
including fine art, classic cars, kidnap and ransom, said it
would also not propose an interim dividend payment for 2020, or
conduct any share buyback.
Sector heavyweight Legal & General said last week
it remained committed to its distribution.
(Additional reporting by David Milliken; Editing by Catherine
Evans and Dhara Ranasinghe)
