Broker snap: Panmure Gordon downgrades Aviva after divi cut

7th Mar 2013 09:43

Shares in insurance group Aviva plummeted on Thursday morning after the company announced a surprise cut in the dividend; while Panmure Gordon thinks the move will remove some uncertainty, it has downgraded its rating for the stock from 'buy' to 'hold'.The 2012 full-year dividend was slashed by 27% to 19p per share in an effort to reduce leverage and increase retained earnings. Meanwhile, Aviva is to restructure its debt and remove the scrip dividend."Whilst there is a business case for such a move we think it is disappointing, and goes against the comments made by the Chairman in Summer 2012," explained Panmure analyst Barrie Cornes.Shares were down a whopping 12.36% at 315.34p by 09:50 on Thursday.Panmure also labelled the 2012 results as "disappointing overall", with operating profits in the Life business and General Insurance both missing forecasts. The net asset value per share of 278p also came in well below the broker's 302p estimate.Cornes said: "The clarification on the dividend may remove an issue that we believe has hindered Aviva's valuation, but we think the market will rightly be disappointed by the cut. We downgrade our recommendation to 'hold'."The target price for the stock has been slashed from 425p to 340p.BC