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Insurers clarify stance in light of Aviva plan to cancel preference shares

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Insurers clarify stance in light of Aviva plan to cancel preference shares

Aviva Plc's indication that it could cancel about £450 million of preference shares has prompted criticism and caused other insurers to clarify their stance on such shares, The Times of London reported, citing unnamed sources.

While unveiling its 2017 full-year annual earnings on March 8, U.K.-based Aviva said it would return more than £500 million of capital to shareholders, include a potential cancellation of preference shares, which will not count as regulatory capital from 2026.

Preference shares do not have voting rights but bear a fixed interest rate, much like bonds, making them sought-after investment instruments. Following Aviva's announcement, preference shares issued by other companies fell, as investors considered the possibility of other issuers canceling them too.

Nationwide Building Society told the Times its core capital deferred shares are "permanent and non-withdrawable." Meanwhile, the Ecclesiastical Insurance Office Plc said it hoped Aviva would reconsider its course of action. The specialist insurer of churches added that it will not cancel its £110 million of preference shares, which carry an interest rate of 8.625%.

Lloyds Banking Group Plc's preferential shares fell significantly since March 8, the newspaper noted.