Partner Article

Aviva to cut jobs and sell 16 businesses

Aviva has outlined plans to sell 16 of its businesses whilst also warning that another 27 need significant improvement, in a move to overhaul the insurance firm.

Job losses are also likely, after the firm revealed that shareholders are concerned that Aviva has “weaker capital levels”, higher debt levels and “more volatile capital”, than rival insurers.

The group was also told that it has over-expanded internationally, and is over-exposed to the Eurozone.

In the shareholder update, company chairman John McFarlane also outlined concerns amongst shareholders that the company may need new equity, or it will be forced to reduce dividends.

In a statement he said that company strategy has changed too frequently, and has resulted to £1.3 billion in charges over the past five year.

The firm also revealed capital growth targets of 160% to 175% of required capital, which will be achieved through the sale of 16 businesses, including some in Suth Korea, UK large-scale bulk purchase annuities and small Italian partnerships, involving £6 billion in capital, a £300 million operating profit after tax and a 5% return on capital.

To help cut further costs by £400 million, Aviva is also set to reduce the number of management layers between the CEO and operational staff resulting in unspecified management job losses.

Mr McFarlane believes that by focussing on fewer businesses, “where we believe we can produce attractive returns and with a high probability of success… Achieve target economic capital levels in line with our industry peers, reduce capital volatility, and bring leverage [debt] down to a conservative level”.

The firm plans to remain a composite insurer, although primarily in the UK and a number of other markets, closing his statement by warning of a challenging environment.

Despite the uncertain outlook, the firm also noted that 15 businesses within the group are showing “unusually high return or growth”, including Poland Life, Singapore Life, Turkey Life and Pensions, UK Personal Property, Canada Personal Property, and UK Life Protection.

This was posted in Bdaily's Members' News section by Ruth Mitchell .