Activist investor Cevian Capital has called on Aviva to return £5bn in excess capital to shareholders after building a stake in the insurer.
The Swedish investment firm today announced it holds 194,549,437 in Aviva, corresponding to around 4.95 per cent of the company’s total number of shares and votes. It makes the firm Aviva’s second-largest shareholder after Blackrock.
But instead of pushing out chief executive Amanda Blanc, who has led the FTSE 100 insurer for almost a year, it is calling on her to build on the series of disposals she has announced.
Aviva has announced plans to sell eight of its non-core businesses, including a deal to sell its Polish arm to Allianz, in a bid to refocus on its UK, Irish and Canadian markets.
“Aviva has been poorly managed for many years, and its high-quality core businesses have been held back by high costs and a series of bad strategic decisions,” Christer Gardell, managing partner and co-founder of Cevian Capital said.
“Aviva now has the potential to become a focused and well-capitalised market leader that produces profitable growth, generates significant cash, and is highly appreciated in the equity markets.”
It is calling on Aviva to slash costs by at least £500m by 2023, a more ambitious plan than management’s target of £300m.
“The poor long-term performance record of Aviva’s shares is hardly Amanda Blanc’s fault and she is already working to fix it after the sale of eight non-core businesses for more than £7.5 billion,” Russ Mould, AJ Bell’s investment director said.
“This may explain why Cevian does not seem to be agitating for a change of leadership or a board seat and appears to be taking a more ‘suggestivist’ stance, since in many ways it and Aviva seem to be in agreement over what to be done. Cevian appears to think that more could be done and faster to release further cash and generate further capital appreciation, even if Amanda Blanc’s brief tenure as CEO is already providing share price gains well in excess of anything generate by her most recent predecessors.”
The insurer’s current share price of just over £4 should exceed £8 per share within three years, Cevian said, and more than double its full-year dividend to 45 pence. Its share price is up 40 per cent on the year and jumped 2.5 per cent on the open.
“Aviva has made significant strategic progress over the past eleven months and we remain sharply focused on further improving our performance,” a spokesperson for the insurer said.
“We regularly engage with investors and welcome any thoughts which move us towards our goal of delivering long term shareholder value”.