Aviva has announced that it will commence a share buy-back of its ordinary shares for up to a maximum aggregate consideration of £600m.
Aviva outlined in its 2017 results that it has “significant” excess capital and therefore committed to deploy £2bn of this in 2018. The deployment involves £900m of debt reduction, £500m for bolt-on acquisitions and the £600m ordinary share buy-back.
Currently the dividend yield on Aviva shares stands at 5.2%, and with the firm expecting the dividend to grow further, the board believes a buy-back is a compelling use of Aviva’s excess capital.
Aviva has entered into an agreement with Citigroup Global Markets Ltd (Citigroup) to conduct the share buy-back programme on its behalf and to make trading decisions under the programme independently of Aviva. The programme will commence on 1 May 2018 and it has been reported that it will not run beyond 31 December 2018.
Shares that are acquired by Citigroup under the agreement will immediately be sold on to Aviva.
The firm has also stated that it has received regulatory approval for the buy-back programme from the PRA.
Aviva group chief executive officer Mark Wilson said: “Aviva has significant surplus cash and we are deploying £2bn productively in 2018. The £600m buy-back, together with our plan to repay £900m of expensive debt maturing this year and invest in bolt-on acquisitions, will grow Aviva’s earnings, strengthen cashflow and improve debt rations.”
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