Why Aviva Plc’s Plan B Could Be Good News For YOU

As it attempts to sell its US business, Aviva plc (LON: AV) has been forced to come up with a plan B. Here’s why I think that’s good news for you.

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No matter how good you are, no matter what your experience and irrespective of the industry in which you work, sometimes plan A just doesn’t work.

This can be through no fault of your own. Sometimes unforeseen circumstances mean you need a plan B.

Indeed, this is exactly where Aviva (LSE: AV) (NYSE: AV.US) could find itself as it tries to sell off its US business. This plan forms part of the new CEO’s strategy to turn the company around and onto a more sustainable, predictable footing than it had been under the old regime.

Sounds fine, but the New York regulator could yet throw a spanner in the works as it investigates acquisitions of annuity companies by private equity houses. Although such an investigation has not yet created a problem for Aviva, the company’s CEO, Mark Wilson, moved to reassure investors that he did not foresee problems with the business being sold as planned to Apollo, the private equity group.

However, he also highlighted the need to take precautions, saying “it would be remiss of us if we did not have detailed contingency plans”. Indeed, one potential plan B could be a carve-out of the New York part of the US business, with the bulk of Aviva’s US business being done in Iowa rather than New York.

So, while Aviva does not yet have to utilise a plan B, it clearly has at least one back-up plan. This is what shareholders want to see: a company thinking ahead and coming up with potential solutions to possible problems.

Furthermore, the way in which plan B has been communicated has been effective, with shares recently hitting a two-year high. Clearly, there are some issues with the sale but Aviva seems nonchalant as to whether it uses plan A or plan B; the end result will be the same: a more stable and sustainable business.

That’s good news for shareholders because the dividend had been too high before it was cut. Moreover, it is set to be cut again this year to 15p per share, putting Aviva on a yield of 3.8%. Although not at the top of the yield charts anymore, this is still well above anything you can find in a savings account, plus you have the chance to benefit from Aviva’s plans (whether they are A or B) in future.

Of course, you may already hold Aviva or may be looking for other income-producing shares. If, like me, you are concerned about inflation and frustrated with low bank savings rates then I’d recommend you take a look at this exclusive report.

It details The Motley Fool’s Top Income Share For 2013 and is completely free to view.

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> Peter owns shares in Aviva.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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