Aviva faces mounting pressure as analyst backs activist in push to offload asset management arm

Oliver Gill
Follow Oliver
Aviva will hold its AGM on 10 May

The activist investor that masterminded the downfall of Aviva’s chief executive in 2012 is calling for the insurance giant’s to ditch its £345bn asset management arm, which it slammed as "underperforming"..

Philip Meadowcroft said Aviva Investors’ funds have "performed poorly" and contributed less than one per cent of the group’s cash flow and 4.6 per cent of the group’s operating profit.

Read more: More, more, more: Here's why Aviva's boss is raving about his numbers

He criticised the firm’s chairman Adrian Montague assessment at last year’s AGM that Aviva’s asset management arm was a core element of the group.

“These are not the results of a core element of anyone's business let alone Aviva's,” said Meadowcroft.

Surely the moment has arrived - after three successive AGMs - when you [Montague] should be guiding the board to seek to offload this permanent flop at money making known as Aviva Investors.

As Aviva prepares to meet shareholders at its AGM on 10 May, Meadowcroft's position is backed by analysts at Shore Capital Markets.

Eamonn Flanagan, an analyst from Shore said he agreed with Meadowcroft's view. He added:

Aviva, and its predecessors, has consistently failed to deliver from Aviva Investors. This underperformance is particularly marked on comparison to Standard Life with Standard Life Investments, Legal & General with LGIM and Prudential with M&G.

Meadowcroft hit the headlines in 2012 when he criticised the board of Aviva during its AGM. He challenged the group’s remuneration report prompting a shareholder revolt that led to the departure of the then Aviva boss Andrew Moss.

Read more: Aviva's grand plan: Balance sheet fixed, now let's capitalise on Brexit

However, while the historic underperformance of Aviva Investors is well-documented among many City analysts, not all agree with Flanagan’s current assessment.

One analyst, who requested not to be named, told City A.M. Aviva committed to remedial action in relation to its asset management arm just two and a half years ago. The person said it is unlikely the FTSE 100 firm’s board will seek to dispose of operations after such a short period.

A separate analyst disagreed with Meadowcroft’s views on Aviva Investors, although, the person added, “I have many other reservations about the Aviva investment case”.

At its full-year results presentation in March, Aviva chief executive Mark Wilson said:

"Aviva Investors had a break out year in 2016 and is starting to make a very meaningful contribution to group earnings.

"After a few years of hard work, Aviva Investors is delivering some good numbers, particularly in fund flows. Fund management operating profit grew 30 per cent to £138m and assets under management grew strongly to £345bn. In the flagship fund range, AIMs, assets under management tripled to £9bn."

The unit of Aviva Group enjoyed the highest net retail sales of any UK asset manager in 2016.

Related articles