Several insurance stocks have bowed to regulator pressure today and cancelled their dividends, leaving Legal & General (LGEN) as something of an outlier in the sector.

The company announced on 3 April it would still pay out £750m to its shareholders as planned, but this runs counter to the decisions announced this morning by Aviva (AV.), down 7.8% at 245.9p , Direct Line (DLG), down 7.2% at 270.4p, Hiscox (HSX), 1.3% lower at 920.5p, and RSA (RSA), which fell 3% to 391.2p. Legal & General shares fell 4.4% to 195p.

Insurer Aviva commented: ‘The board fully recognises the importance of cash dividends to all of our ordinary shareholders, and expects to reconsider any distributions in the fourth quarter of 2020.’

Other insurers have signaled they will also reconsider dividends later in the year.

AJ Bell investment director Russ Mould says: ‘If income investors were hoping they could rely on the insurance sector for dividends, after Legal & General resisted regulator pressure to cancel its own payout, they have now had a rude awakening.

‘Aviva, RSA, Hiscox and Direct Line are taking more than £1 billion combined off the table today. It seems likely Legal & General, looking more and more the outlier, will have to follow suit.’

Mould notes that insurers are in a different position from the banks, which have already cancelled their payouts.

He adds: ‘While the banks would have a weak case for continuing dividend payments given their history and the state support they required during the financial crisis, insurers did not require propping at the time and most can point to robust balance sheets.’

However, he also observes that while premiums are likely to continue to flow, it’s hard to gauge what impact the current crisis will have on claims.

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Issue Date: 08 Apr 2020