The insurer will be trimming the fat to survive the downturn.
Aviva, the number 2 insurer in the United Kingdom, is making insurance news by selling nearly a quarter of its businesses in a dramatic effort to rebuild investor support following struggles with its declining share price.
The company’s new chairman, John McFarlane, hopes that this shake-up will be just what is needed.
McFarlane stepped in following the removal of Andrew Moss in May 2012, when Aviva’s stock performance was strikingly weak. He will be taking the axe to sixteen of its least successful businesses, which are responsible for 18 percent of its operating profits.
One significant advantage held by Aviva is that they do have a large number of business units. As several of them are not generating adequate return on their risk capital, it is possible for the insurer to simply slough away some of its problems by cutting those units. Equally, as the environment isn’t currently one idea for selling, there remains significant risk in the execution of this plan.
Among the assets that Aviva has tagged for sale include its stake in Delta Lloyd, it’s rival from Holland, as well as its bulk purchase annuity unit and its South Korean arm.
The company stated in its latest insurance news that it will sell 25 million Delta Lloyd shares at market closing.
This means that once the market is closed, it will have made a sale of a stake of approximately 14 percent. It also stated that it has accelerated the growth of its books through joint bookrunners of Goldman Sachs and Morgan Stanley. The sale’s stake has been estimated at a value of about €290 million, based on the price at closing last Thursday, at €11.6. Following the sale, Aviva would maintain a shareholding of 27 percent.
Aviva then made an additional insurance news announcement that it would increase the shares sold.
After the initial statement, it made a second release, saying that it would be selling another 12 million shares, bringing the total number to be sold up to 37 million in total. That said, among all of its various insurance news statements, it has declined to share any more information regarding other assets that it will be selling, as it felt that this could make their sale more challenging.