Aviva plans to “exit” 16 segments deemed to be
non-core as part of a revised strategic plan to focus on fewer
business segments where it believes it can produce attractive
returns.
Aviva’s new chairman John McFarlane made the
announcement in a recent message to Aviva’s shareholders.
Go deeper with GlobalData
Speaking to Life Insurance
International, a spokeswoman for Aviva explained that the term
“exit” means that either Aviva may sell its stake in a business
segment or stop writing new business for a particular sector.
For example, she said Aviva would stop
writing new business for the UK large-scale bulk purchase annuity
market where it will focus on smaller bulk deals – involving
premiums below £50m – because the returns are more profitable
and in line with the provider’s return of capital criteria.
Aviva has already announced its intention to
exit Taiwan and South Korea.
Value of life businesses
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By GlobalDataFrom the full review of the 58 individual
business segments in the group, Aviva said it has 15 segments with
unusually high return or growth. This includes Poland Life,
Singapore Life, Turkey Life and Pensions; and its UK life
protection business.
McFarlane noted shareholder concerns about
their disappointment over Aviva’s share performance, its business
complexity and overexposure to Eurozone risk and to traditional
capital intensive life products.
He added that: “Shareholders believe we have
weaker capital levels, higher external and internal leverage, and
more volatile capital than our peers. They are nervous we may
need new equity or reduce the dividend.”
In addition to reducing the number of business
segments within the group, Aviva will be looking to improve
financial performance by reducing expenses. The group hopes to make
a £400m saving on operating costs between 2011 and 2014, as well as
reducing the management layers between operational staff and CEO
from nine to five levels.
McFarlane said that Aviva was “consulting with
those impacted” by the expense reduction.
A spokesperson for Aviva also confirmed there
would be some job losses, but that the company hoped it could work
towards more voluntary redundancies and a policy of ‘natural
wastage’; closing out roles as and when employees leave.
