INSURANCE giant Aviva yesterday unveiled radical plans to dispose of a quarter of its business units in a damning indictment of the strategy pursued by former chief executive Andrew Moss.
Aviva said it will sell or close down 16 underperforming divisions, including its South Korean business and several of its Italian partnerships. Although it declined to name all of the underperforming units, Aviva confirmed after the markets closed that it will sell a third of its stake in Delta Lloyd, currently valued at €290m (£231m).
Analysts say the firm’s American business is also likely to be on the market.
“Shareholders find our business difficult to understand and feel we have expanded the international scope of our business too far,” executive chairman John McFarlane explained in a lengthy mea culpa on behalf of the firm.
“We have had £1.3bn of below-the-line restructuring charges over the past five years and yet are perceived to be bureaucratic and inefficient.”
Instead he will seek to produce a leaner group, cutting middle-management positions as part of a drive to reduce costs by £400m.
In a sly reference to Moss’ pledge to grow Aviva into a global giant McFarlane added: “I do not intend to make aspirational promises that we may be unable to keep.”
Analyst Barrie Cornes of Panmure Gordon said the measures were “logical and sensible” and “could well prove to be the turning point for long suffering shareholders”.
But Kevin Ryan of Investec pointed out that “selling businesses in the current environment will be challenging”.
Aviva currently owns 58 individual businesses, with the top 15 – which include units in emerging markets and the UK Life Protection arm – producing a £650m operating profit after tax on £3bn of capital.
By contrast the 16 units earmarked for disposal consume £6bn of capital but produce post-tax operating profits of just £300m.
Meanwhile the search continues to find a full-time successor to Moss, who quit in May after investors rejected his pay deal. An appointment is expected in early 2013. Aviva’s shares closed up 1.1 per cent at 284.6p.