Impatient New Zealander Jolts U.K. Insurance with Aviva Shake-Up

By | January 9, 2015

During Mark Wilson’s first week at Aviva Plc in London he stormed out of a meeting with top executives after growing frustrated with the lack of boardroom debate.

In the two years since, the chief executive officer sold units from Spain to Russia, cut the workforce and last month announced the biggest U.K. insurance deal in 15 years, the 5.6 billion-pound ($8.5 billion) purchase of Friends Life Group Plc. Almost half of the managers at that early meeting are gone, said people with knowledge of the events who requested anonymity.

“He’s clearly a very driven man with a clear vision, but I wouldn’t want to cross him,” said Robert James, a financial analyst at Old Mutual Global Investors in London, which holds Aviva shares. “He is extremely impressive and knows exactly what he is going to do.”

Now the New Zealander must persuade investors his purchase of Friends Life will prove more successful than the merger that created Aviva in 2000. That combination, between Norwich Union Plc and CGU Plc, failed to reward shareholders. The stock has fallen by about half since Aviva was formed, the worst performance among Britain’s three biggest insurers.

“The history of U.K. life integration is not particularly rosy,” said Matthew Preston, an analyst at Berenberg in London who rates Aviva sell. There are risks in merging two “big lumpy businesses” that hold policies dating back to the 1970s, he said.

Wilson, 48, declined to comment for this article. Aviva investors will probably vote on the Friends Life purchase by the end of March.

Wilson’s Deal
Friends Life, a smaller competitor with £300 million [$454 million] of excess cash and £4 billion [$6 billion] of surplus capital, was open to Aviva’s advances after government changes to the retirement system earlier in the year scuppered its plans to boost annuity sales, people familiar with the transaction said.

Wilson began serious talks with Friends Life CEO Andy Briggs in the second half of the year and by November they reached an agreement, the people said.

“The insurance industry is not generally noted for its speed for doing things — then someone like Mark turns up,” said Clive Cowdery, 51, the founder of Friends Life. “This is very much his deal.”

Born in Rotorua, a district of about 65,000 people on the North Island of New Zealand, Wilson followed his father and grandfather into the insurance business after earning a degree in management studies from The University of Waikato.

‘More Attractive’
He surprised investors and many of Aviva’s almost 28,000 employees when he announced the takeover talks in November, saying the all-stock purchase will boost cash flow, reduce debt and lead to cost reductions.

“I haven’t wanted to own Aviva because I haven’t liked the amount of leverage in the group and there are concerns about capital,” said Alastair Gunn, a money manager at Jupiter Fund Management Plc in London who holds Friends Life. The deal “addresses those issues,” he said. “The new Aviva now looks a lot more attractive.”

BlackRock Inc., Aviva’s biggest shareholder, increased its stake following the purchase, though not all investors have embraced it.

The Capital Group Inc., which was one of Aviva’s top 10 investors with a holding of more than 4 percent, began selling shares in November and now owns about 1.1 percent, regulatory filings show. Officials for the Los Angeles-based firm and BlackRock declined to comment on their holdings.

Shares of Aviva, Britain’s second-largest insurer after Prudential Plc, fell about 10 percent since the talks were announced in November, compared with a 2 percent decline in the FTSE 350 Life Insurance Index. The shares have advanced 30 percent since Wilson took over at the start of 2013, lagging behind the 74 percent advance in Prudential.

All Blacks Fan
John McFarlane, 67, who started revamping Aviva as executive chairman in 2012, overlooked internal candidates including former CFO Patrick Regan to bring Wilson on board. A shareholder revolt over compensation plans had forced the resignation of former chief Andrew Moss, who invested in Europe just before the sovereign-debt crisis took hold.

Wilson previously worked as chief operating officer and later CEO of Hong Kong-based AIA Group Ltd. He left in 2010 after a clash with Robert Benmosche, the CEO of American International Group Inc., then AIA’s parent. A sports enthusiast who inherited a love for New Zealand’s national rugby team, the All Blacks, he now eschews their distinctive black jersey because AIG sponsors the team, people who know him said.

‘Direct’ Style
Within four months of joining Aviva, Wilson announced plans to eliminate 2,000 jobs, cut the dividend by 44 percent, freeze bonuses for 400 managers and sell off or reorganize units. He pared the number of management levels to five from nine and initiated quarterly performance reviews, requiring those whose units were lagging to explain why, said employees who asked not to be identified discussing internal matters.

“My style is very direct and candid,” Wilson said in an interview posted on the company’s website after he was named Aviva CEO. “I can promise that people will know where they stand.”

He returned Aviva to profit in 2013 after a record loss the year before, and boosted the insurer’s market value by about £3 billion [$4.54 billion] since joining. The company now operates in 17 markets, compared with 28 in 2011.

“I do turnarounds,” Wilson told journalists on a conference call last month. “That is all I was brought into Aviva to do. It’s very easy to look at what needs to be done — the hard part is getting people to do it.”

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