Aviva CEO’s Exit Shows a Board Moving Quickly to Placate Investors: Opinion

By Lionel Laurent, Bloomberg View | October 10, 2018

British insurer Aviva Plc has parted ways with CEO Mark Wilson, effective immediately, and given itself four months to find a successor.

The manner of his sudden departure after almost six years may look harsh, but it’s not hard to see why: The shares have trailed peers at home and abroad in recent years. Wilson’s successor might not need to change strategy substantively, just simply execute it better than he did. (Editor’s note: See graphic below for a comparison of UK insurers’ shareholder returns).

Shares of Aviva – which had fallen 8 percent this year – rose as much as 2.3 percent on Tuesday’s announcement, despite the company being left without an official CEO. Chairman Adrian Montague will temporarily take the reins, backed up by three executives. This looks like a board moving quickly to placate investors’ performance concerns.

Wilson’s tenure was mixed bag in terms of performance and stakeholder relations. There have been some obvious improvements since 2013: net profit doubled between then and 2017, and Aviva paid out dividends at a bumper rate. The 2016 purchase of Friends Life Group Ltd. for about 5.8 billion pounds ($7.6 billion), unpopular at the time, has been a great source of savings and market-share growth. Analysts rate Aviva highly.

The downside is that dividends and buybacks haven’t been able to counteract growing competition and a slowdown in Aviva’s core insurance business. Aviva’s first-half operating profit fell 2 percent, and net income tumbled by 47 percent – yet the insurer lifted dividends by 10 percent. With an inferior capital position to some of its competitors, Aviva’s confidence in its ability to do everything at the same time – pay dividends, buy back shares, seal deals and repay debt – seemed optimistic.

Some of Wilson’s moves outside of the executive suite also weren’t to everyone’s taste. In March, he joined the board of BlackRock Inc., the world’s biggest asset manager, stirring doubts about his commitment to the job at Aviva. And a ruckus over Aviva’s plan to buy back pricey hybrid debt led City firms to take a dimmer view of Wilson, even if he eventually backed down from the idea.

Are there bold new strategic shifts to make? Perhaps some of the 3 billion pounds earmarked for spending should be more selective, and tilted towards growth and reinvestment. Aviva relies on the U.K. for almost two-thirds of operating profit, according to Bloomberg Intelligence, so expanding abroad might be a good bet. On the other hand, a radical turnaround seems unlikely given Aviva’s size and capital-preservation needs.

In the end, this looks like a good move for Aviva. The big strategic question remains unanswered, but in the short term, no CEO looks better than an unloved one.


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