Aviva: Blanc canvass


Amanda Blanc, new chief executive of Aviva, is wooing the City with a single word — “focus”. The contrast is with predecessor Maurice Tulloch, who struggled to articulate his mission in less than a paragraph.

“Focus” is a flexible term, however. For the moment, it just means that the sprawling UK-based insurance and savings group may dispose of most foreign businesses and concentrate on the UK, Ireland and Canada. In time, “focus” could describe a complete break-up.

On paper it all looks so simple. The company, which just announced half-year operating profits 11.6 per cent lower at £1.22bn, is worth less than the sum of its parts. All the former Axa executive has to do is sell a few of these to pop the value to Aviva shareholders — supposedly.

Chart shows Aviva trades at 50 per cent less than its notional value

Citi reckons the components, glommed together over decades when acquisitions were seen as cooler than disposals, are worth 50 per cent more than Aviva’s £11bn market capitalisation. France, Poland, Italy and Asia produce under one-quarter of divisional profits. The US investment bank optimistically values them at £7bn.

There are easier tasks than selling risk-pricing businesses during a pandemic and economic downturn. Some of the assets are poor quality. Capital efficiencies drop as an insurer shrinks.

Over the next year, Ms Blanc needs to show she can cut deals as well as verbiage. Mr Tulloch could not sell a Singaporean offshoot for an acceptable amount of cash. Panmure’s Barrie Cornes reckons proof of progress towards Ms Blanc’s slimmed-down Aviva is worth £1 on the share price of about £3. Another £1 could come from a full break-up: splitting off the life insurance division.

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If Aviva then bought RSA — or as much of the rival general insurer as regulators allowed — the group would have scale as well as focus. But this is to pile up hypotheticals like Jenga bricks. All we can say today is that Ms Blanc has made a good start. A dividend cut discreetly tucks away some rainy day money before that new boss gloss wears off.

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