Aviva will shake up its corporate structure and sell off its Hong Kong business as chief executive Maurice Tulloch seeks to revive investor interest in the insurance group.
Mr Tulloch, a company veteran who became chief executive in March after the departure of Mark Wilson, is under pressure to better define Aviva’s strategy and boost its share price, which has fallen by a fifth over the past five years. “The hard truth is that Aviva needs to be better, and it will be. Our performance has been good, but good isn’t good enough,” said Mr Tulloch.
The company on Wednesday laid out a set of targets for the next three years. Mr Tulloch is aiming to generate £8.5bn to £9bn of cash flow between 2019 and 2022, and achieve a return on equity of 12 per cent. The return on equity target is slightly lower than the company recorded last year, although that was boosted by one-off items.
Mr Tulloch had already promised to cut £1.5bn of debt and shave £300m a year off the cost base by cutting 1,800 jobs. Shareholders were nonplussed by the scale of the changes, with the shares falling 4 per cent in morning trading.
Analysts and investors have long complained that while big UK rivals such as Prudential and Legal & General had very clear strategies, the same was not true of Aviva whose businesses cover life insurance, general insurance and asset management.
Aviva has revealed a new structure for its business, which will in future be split into five units: investment, savings and retirement; UK life insurance; general insurance; European life insurance and Asian life insurance.
“We want to make Aviva easier for investors to understand and we want to give more clarity on, and responsibility for, our performance. I took on this job to grow the organisation. We have great businesses but we must invest in them,” said Mr Tulloch.
He also promised to invest £1.3bn in growth initiatives. The company on Wednesday added that it would sell its stake in its Hong Kong business, called Blue, to its partner Hillhouse Capital. The operation has been radically restructured over the past two years, and plans to win market share by selling life insurance directly online to customers, bypassing the agents that dominate the local market. It did not say how much it would receive for the stake.
The group this week scaled back plans for a wider sale of its Asian businesses. It announced a review of its operations in the region this year, but on Monday said it would keep hold of the businesses in Singapore — its biggest Asian unit — and in China. Businesses in Vietnam and Indonesia could still be sold.
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