Aviva Unveils Strategy in Effort to Stem Investor Concern

Aviva CEO Maurice Tulloch (pic) has spelt out his vision for the company’s future which will see the firm divest its operations in Hong Kong, Vietnam and Indonesia.

The underwriting group held its investors day at which Mr Tulloch sought to calm shareholders’ fears over its plans for profitable growth. The composite insurers above have been the subject of much debate over its future strategy and its efforts to drive profitable growth.

Mr Tulloch announced that the insurer is to create five new operating divisions; investments, savings & retirement; UK life; general insurance; Europe life; and Asia life.

“Aviva is a business with ambition,” said Mr Tulloch. “We are investing in new services, new products and new technology. We expect growth, especially in higher return businesses such as General Insurance and Asia and also, from our new Investment, Savings & Retirement business.

“Aviva’s focus is delivering sustainable growing returns to shareholders. Our forecast cash flows are more than sufficient to sustain our dividend, reduce debt and grow Aviva. Our return on equity target of 12% underpins our progressive dividend for the long-term.

“Our strategic review has been rigorous and thorough. I am committed to running Aviva better. We will be more commercially focused, manage costs rigorously and be more disciplined in how we invest. We will excel at the basics, giving customers a simpler, faster and more convenient service. Getting these fundamentals right will result in a simpler, stronger, better Aviva, while also improving returns for shareholders.”

In Asia Aviva said it would retain its businesses in Singapore and China. “These are profitable businesses, delivering attractive growth and generating positive cash-flow”, It added. “We have agreed the sale of our stake in our Hong Kong joint venture, Blue, to our partner Hillhouse Capital, and we are in discussions with our partners in relation to our business in Vietnam and joint venture in Indonesia.”

The firm released its financial targets for the next two years. These included:

  • Solvency II return on equity: 12% (2022)
  • Group operating capital generation: £7.5 billion (2019-22 inclusive)
  • Cash in-flows to centre: £8.5 – 9.0 billion (2019-22 inclusive)
  • Cost reduction: £300 million net saving (2022)
  • Debt leverage: £1.5 billion debt reduction (2019-22)

It added that operating profit for this year was expected to be broadly in line with management expectations, including an estimated £300-400 million of net management actions (2018: £350 million).

“In 2019, we estimate a contribution of £300-£400 million from management actions, reflecting favourable development of longevity reserves and other items. In the longer-term we are signalling an expected range of £0 to £200 million per annum,” added the insurer.

Aviva is  to create five new operating divisions; investments, savings & retirement; UK life; general insurance; Europe life; and Asia life.