Investors underwhelmed by Aviva’s restructuring plans
Shares in Aviva slipped on Wednesday after the insurer announced plans to restructure its business and sell off its Hong Kong division in a bid to revive investor interest in the group.
The insurance company will simplify its business structure into five operating divisions and sell its stake in Hong Kong business, called Blue, to co-investor Hillhouse Capital.
Read more: The Investor Forum pushes Aviva to shake-up strategy
Maurice Tulloch, a company veteran, took over as Aviva chief executive in March. He has come under pressure from investors and analysts to better define the company’s strategy as well as to revive its flagging share price.
“I am committed to running Aviva better,” said Tulloch ahead of a presentation to investors on Wednesday.
“We will be more commercially focussed, manage costs rigorously and be more disciplined in how we invest,” he added.
Aviva shares fell following the strategic update, and were down 3.66 per cent at lunchtime at 403p.
Under the new strategy, the group will be rearranged into five entities. It will fold Aviva Investors, its fund management arm, into a broader investments, savings and retirement division.
The four other new divisions will be UK life, Europe life, Asia life, and general insurance.
Aviva set out several targets for the next three years, including a 12 per cent return on equity, a £300m net cost saving, and an aim to generate between £8.5bn and £9.5bn of cash flow.
The company said operating profit for the year was in line with management expectations.
Aviva said it was in discussions about the future of its businesses in Vietnam and Indonesia after the sale of Blue, which Tencent also has a stake in.
The insurer said earlier this week it would keep its Singapore division following a review of its Asian business, raising speculation it could not get a satisfactory price for it. The group also said it would keep its joint venture in China.
Responding to today’s update, Citi analysts said: “There is a lot of underlying detail to work through but fundamentally Aviva strategy calls for a slow burn story that requires consistent execution vs. the more aggressive action regarding the shape of the group that some were hoping.”
Read more: Aviva shares fall as it denies reports it is selling its Singapore and China businesses
Morgan Stanley analysts said that despite news of the Hong Kong sale, Aviva did not announce any “material changes to the perimeter of the business”.
“The new targets represent a change in emphasis for Aviva,” they added, “with a focus on quality of earnings and capital rather than growing earnings”.
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