Hopes that Aviva might use the cash from two major disposals in recent months to prop up its dividend were dashed on Thursday as the business said it would slash the payout by nearly a third.
The insurance giant said it expects to pay out around 21p for the full year, as it scales back its operations.
Aviva sold one of its Italian arms this week for around £355 million, and its Singapore business in September for £1.6 billion.
Alan Devlin, an analyst at Shore Capital Markets, said: “The market might have hoped, indeed expected, that the reduction was somewhat lower due to the redeployment of the proceeds from the asset sales, however it is too early to take this into account.”
The 21p dividend is now set at a level where Aviva can afford to pay it out based only on its core businesses in the UK, Ireland and Canada, analysts said.
It is a reduction from the 30p per share that Aviva paid in 2018, but above the 15.5p paid out for the 2019 year after the Covid-19 crisis hit the much higher planned dividend.
The three countries make up around two-thirds of Aviva’s market and are the focus for new chief executive Amanda Blanc, who is on a mission to pull back from many other parts of the world.
The sales of the Italian and Singaporean businesses fall into this.
Richard Hunter, head of markets at Interactive Investor, said: “The group is edging towards a sharper focus on its business within the UK, Ireland and Canada.
“This could come at the expense of the operations in Continental Europe and Asia, given the desire to simplify the portfolio. These operations will be managed for long-term value but in the event of the units failing the strategic objectives, Aviva is likely to withdraw.”
Aviva said it now expects Covid-19-related claims to reach £100 million, down from the £165 million it had estimated earlier this year.
Ms Blanc said: “Our trading performance is robust and our financial position is strong with a capital surplus of £11.8 billion.
“The response of our people to the Covid crisis has been nothing less than phenomenal and I would like to thank them for all they have done for our customers this year.”