Aviva will shake up its corporate structure and sell its Hong Kong business as chief executive Maurice Tulloch seeks to rekindle investor interest in the insurance group.
Mr Tulloch, a company veteran who became chief executive in March after the departure of Mark Wilson, is under pressure to better define Aviva’s strategy and boost its share price, which has fallen by a fifth in the over the past five years.
“The hard truth is that Aviva needs to be better, and it will be,” Tulloch said. “Our performance was good, but good is not good enough.”
The company on Wednesday set a set of goals for the next three years. Mr Tulloch aims to generate £8.5-9bn of free cash flow between 2019 and 2022 and achieve a return on equity of 12%. The return on equity target is slightly lower than that recorded by the company last year, although it has been reinforced by one-off items.
Mr Tulloch had previously promised to cut £1.5billion in debt and cut £300million a year from the cost base by cutting 1,800 jobs.
Shareholders were left baffled by the scale of the changes, with shares falling 4% in morning trading to 402p.
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Analysts and investors have long complained that while big UK rivals such as Prudential and Legal & General had very clear strategies, the same was not true of Aviva, whose business spans life insurance, l general insurance and asset management.
James Shuck, an analyst at Citi, said the strategy unveiled Wednesday was “a slow-burn story that requires consistent execution versus the more aggressive action regarding group shape that some were hoping for.”
Paul De’Ath, an analyst at Shore Capital, said: “While we agree that the company needs to do more to get the most out of the assets it has, we cannot disagree. avoid thinking that investors may be a little disappointed by the strategic review.
Aviva has unveiled a new organization of its business, which will now be split into five areas: investment, savings and retirement; UK life insurance; general insurance; European life insurance and Asian life insurance.
“We want to make Aviva easier for investors to understand and we want to provide more clarity and accountability for our performance,” Tulloch said.
He also promised to invest £1.3 billion in growth initiatives. “I accepted this position to develop the organization. We have great companies, but we have to invest in them.
The company added on Wednesday that it would sell its stake in its Hong Kong business, called Blue, to partner Hillhouse Capital. The operation has been radically restructured over the past two years and plans to gain market share by selling life insurance directly to customers online, bypassing agents who dominate the local market. He did not specify how much he would receive for the bet.
The group this week scaled back plans for a wider sale of its Asian business. It announced a review of its operations in the region this year, but said on Monday it would retain operations in Singapore – its largest Asian unit – and China. Businesses in Vietnam and Indonesia could still be sold.