Aviva, Britain's second-biggest insurer, cut its dividend by over a quarter to provide extra funds for a turnaround strategy aimed at bolstering capital and profit.
The company's shares plunged 12 percent on the news and the stock was the worst performer on the FTSEurofirst 300.
Aviva shareholders will get 19 pence in total from 2012 earnings, down from 26 pence the previous year and far below the 25.6 pence expected by analysts in a company poll.
The cut, Aviva's first since 2009, is the latest step in a reorganization launched by Aviva last July after investors irked by a persistently weak share price forced out chief executive Andrew Moss.
"I regret that this has become necessary, but can assure shareholders we took this decision only after examining scrupulously all alternatives," Aviva Chairman John McFarlane said in a statement.
The cut will help Aviva pay down debt and build up its capital reserves, McFarlane said.
Under the recovery plan, Aviva has cut costs and raised about 2.4 billion pounds by selling less profitable businesses that tie up too much capital, including its subsidiary in the United States.
Aviva shares have risen by a third since the revamp began, partly recouping a near-60 percent decline under Moss's five-year tenure, but only narrowly beating a 28 percent gain for the European insurance sector as a whole.
The insurer, now run by former AIA boss Mark Wilson, also said its 2012 operating profit fell 4 percent to 1.776 billion pounds.
The insurer, which makes about 40 percent of its profit in mainland Europe, suffered further capital erosion during the euro zone sovereign debt crisis.
European rivals RSA and Mapfre have in the past month also trimmed dividends as rock-bottom interest rates erode the sector's income from investments, although most insurers have at least maintained their handouts to shareholders.
Rival British insurer Standard Life on Thursday announced a one-off payout of 302 million pounds, citing its strong capital position.
One of the European insurance sector's main attractions for stock market investors has traditionally been its ability to pay relatively big dividends, reflecting its predictable revenues as customers renew their policies annually.