After Aviva’s Reorganization, CEO Vows More Accountability

By Benjamin Robertson | November 20, 2019

U.K. insurer Aviva Plc’s reorganization into five units will make it easier for investors to understand the company and foster a “culture of accountability,” according to Chief Executive Officer Maurice Tulloch.

Tulloch, who took over the helm of the $20.4 billion life and general insurer in March, said in an interview that he wanted a “no-nonsense approach,” with management delivering on its promises.

Under plans announced on Wednesday, Aviva will simplify its businesses into five divisions. The firm will also sell its stake in its Hong Kong unit, named Blue, to co-investor Hillhouse Capital, and is talking to partners in Vietnam and Indonesia in relation to local businesses in those markets. The company said on Monday that it planned to retain its China and Singapore operations.

Shares fell as much as 4.1% after the overhaul plan was made public. The question remains whether Aviva’s goal of simplifying and improving its core businesses is achievable given its numerous similar attempts in the past, Shore Capital Group’s Paul De’Ath said.

Aviva will rejig its product mix and roll out unit-linked investment funds to savers, a response in part to low and negative real interest rates across much of Western Europe, Chief Financial Officer Jason Windsor said in an interview.

Cost Cuts

With French government bonds yielding zero, “it doesn’t make any sense to invest,” Windsor said. “When you have a 20-, 30-year time horizon, you can be much more thoughtful about where you put your retirement savings.”

Operating profit for 2019 should be broadly in line with management expectations, Aviva said in a statement. The insurer is targeting 300 million pounds ($387 million) in net cost savings by 2022 and 1.5 billion pounds in debt reduction between 2019 and 2022.

Tulloch said the decision to exit Hong Kong meant capital could be better deployed elsewhere. By contrast, Aviva’s China operation paid its first dividend last year, and offers “strong long-term growth prospects for the group,” he said.

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