AVIVA yesterday echoed President Barack Obama, promising the best is yet to come as it touted costly transformation plans. It doesn’t face a crisis as ominous as America’s fiscal cliff, but the headwinds are severe. As we wait for a decision on its new chief executive, Aviva can’t even promise an easy transition, admitting with refreshing honesty its plans have encountered “more bureaucracy than desirable”.
Most significantly financially, Aviva said yesterday that any sale of its US life and annuities business would come “at a substantial discount”. By some estimates, it could wipe off two thirds of the £3bn book value.
With nine transformation programmes, Aviva faces an uphill task. Its journey must start with a substantial loss. John McFarlane, its new chairman, is highly competent and wonderfully blunt. He deserves nvestors’ backing for the long-haul.
THE WORLD IS NOT ENOUGH
Meanwhile Balfour Beatty revealed that being a global firm won’t necessarily save you from the world’s economic turmoil. The infrastructure services firm gave a profit warning thanks to three different developed markets all unhappy in their own ways.
In Europe, the problem is rail construction. In the UK, further market deterioration is blamed on the lack of big infrastructure projects. Finally, the firm warns that 2013 looks set to be a tough year in the sector and notes “a reduction in confidence in the US building market following some encouraging signs earlier in the year”. It seems there’s no bright spots left on the map.
With 650 jobs to go in the UK back office alone, Balfour has made tough calls in a tough market. This warning should put the whole sector on watch.