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A number of UK insurers have cancelled their dividends after the Bank of England warned for the second time that payouts should be considered very carefully in light of the coronavirus crisis.
Aviva, Direct Line and Hiscox have all this morning said they will cancel the distributions to shareholders – casting a very unflattering light indeed on Legal & General, the FTSE 100 insurer that last week said it would press ahead with a £750m payout.
The Bank of England wrote to banks and insurers on 31 March, saying they should consider their dividends very carefully.
Today’s statement makes it very clear that it is not happy with payouts continuing. It said: "We welcome the prudent decision from some insurance companies today to pause dividends, given the uncertainties associated with Covid-19.
"As set out in our letter of 31 March, when insurers are considering whether or not to proceed with any dividend payments, their boards should pay close attention to the need to protect policyholders and maintain safety and soundness. Decisions regarding capital or significant risk management issues need to be informed by a range of scenarios, including very severe ones."
Many insurers have not been too badly affected by the crisis, particularly if their core business has not had to cover big payments to insurance policyholders. However, continuing to pay hundreds of millions of pounds when the economy is entering a deep recession is not a great look. Watch out for insurance stocks today.
The FTSE 100 has fallen by 1.2% in initial trading. Rolls-Royce and Tesco are among the biggest fallers.
The Stoxx 600 index, tracking the biggest companies across Europe, fell by 0.6%.
Also coming up
• 10:45am BST: Italian 12-month bond auction
• 7pm BST: US Federal Reserve Federal Open Markets Committee meeting minutes
We’ll be tracking all the main events throughout the day ... |
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The global stock market rally feels fragile 
