Aviva share price down 13%

Aviva's share price plunged 13% in early morning trading after it slashed its final dividend payment from 16p per share to just 9p. The disappointing full-year results also included losses after tax of £3.1 billion, down from a profit of £60 million in the previous year.

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Prudent though it may be, the dividend cut is a major disappointment to investors and Aviva's share price has reacted accordingly.

The company's sugar-coated description of the past year having been one of transition cannot mask the difficulties Aviva is facing. The £3.3 billion write-down on the sale of its US business sits uncomfortably alongside the challenges created by the current economic environment.

On a positive note, the simplification of the business, reduction of debt and generally positive trading picture will be of some relief to investors patient enough to continue owning the shares. There are also improvements in the capital cushion, whilst a cost-cutting programme remains in force.

On calm reflection, this may prove to be a pivotal point for Aviva. Expectations have now been set at a lower level, including dividend prospects. Today's price drop could prove to be a potential entry point for investors looking for what is now a recovery play. Nevertheless, more immediate success stories lie elsewhere in the sector and the general market view of a cautious buy will come under some considerable pressure.

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Financial highlights:

• The final 2012 dividend was cut by 44% to 9 pence per share (2011: 16 pence), with the total dividend paid over the course of the full-year 2012 therefore down by 27% (2012: 19 pence - 2011: 26 pence).
• Full-year loss after tax of £3.1 billion (2011: profit after tax £60 million). A £3.3 billion write-down in the value of its disposed US business was largely responsible. For continuing operations, the loss after tax was £202 million.
• Underlying or adjusted operating profit fell by 4.3% to £1.78 billion (2011: £1.86 billion) hindered by an adverse foreign exchange impact of £65 million.
• The group's capital cushion (IGD solvency surplus) improved to £3.8 billion as at 31 December 2012 (2011: £2.2 billion).