CGNU shareholders vent anger at dividend cut and rebranding

CGNU's management faced a barrage of criticism at a tense annual general meeting in London yesterday, as shareholders condemned the insurance giant's decision to slash its dividend and adopt a new name.

Despite a triumphal year for CGNU, which saw it become Britain's biggest insurer, shareholders accused directors of "disgraceful" and appalling" behaviour, with some saying the new name, Aviva, sounded like one of Britain's least loved bus companies.

Criticism centred on the fact that the insurer announced in February that despite record results it was slashing its dividend by 40 per cent from next year. Shareholders also struck out at CGNU's decision to rebrand itself Aviva. It announced the move after consulting customers in other countries, who said they were not keen on the CGNU brand.

But institutional and private investors condemned the change, due to its likeness to Arriva. The bus company complained to CGNU when the change was first mooted and is now considering its options, including mounting a legal challenge.

Aviva, chosen by CGNU to sound European and to suggest affirmation of life, is also the name of a feminist group in London and a lesbian website in Vancouver, Canada.

Despite the criticism, CGNU's board pressed through the name change by a margin of 96 per cent of those voting. It will adopt it as the name of the plc from 1 July, but it will still sell policies in the UK under the Norwich Union brand.

A considerable number of institutional investors were expected to abstain in the vote after the National Association of Pension Funds alerted them to Arriva's objections. CGNU would not publish the number of abstentions or say how many of the votes in favour were proxies cast by the chairman.

The 40 per cent dividend cut drew the most criticism from private investors. Andrew Gibson, a Glaswegian shareholder, said: "Is it absolutely necessary to change the name to Aviva? 'Judas' seems more appropriate or, like Gerald Ratner's jewellery, 'Crap'?"

Mr Gibson castigated the board for cutting the dividend at a time when directors' salaries are rising but policyholders' annual bonuses are falling. "There is a lack of compassion in this company now. Policyholders and shareholders are suffering yet directors are receiving an extortionate rise in salaries," Mr Gibson said.

CGNU's annual report and accounts say that its chief executive, Richard Harvey, received nearly £1m in salary and benefits last year, a rise of £140,000 on the previous year. The board also drew investors' ire by requesting an increase in the maximum that can be paid to its non-executive directors, from £750,000 in total to £1m.

Pehr Gyllenhammar, the chairman of CGNU, said the rise in directors' pay was justified by the company's performance. "We grew our operating profit by more than 40 per cent, which was about the best in the world for an insurer," he said.

Mr Harvey said the record growth did not enable the company to continue to maintain its dividend growth because it needed to save money to invest in the business for future growth.

"Our large competitors in Europe are all paying lower dividends than us and they are using the money to invest for growth. Until now, we have been paying out more than our distributable profits," Mr Harvey said.

CGNU will save £300m by rebasing its dividend next year. The move brings it into line with some European insurers, where yields on dividends are typically less than 3 per cent. But CGNU's projected yield, of 3 per cent, will be considerably lower than its UK rivals.

Its shares fell 6.5p to 769.5p.