Aviva merges operations at the expense of 950 jobs

Aviva cut 950 jobs in Ireland last week as it pursued its strategy of creating a leaner cost base.

Aviva Europe chief executive Igal Mayer, formerly head of UK general insurance, said the Irish non-life business was uncompetitive, stressing the Ireland cost base as a percentage of premiums was 19% compared to just 10.5% in the UK.

The move will combine Aviva Ireland with Aviva UK to create a new UK and Ireland region based at the London headquarters.

A number of jobs could be transferred over to the UK, although exact figures have not been given.

Combining the technology and infrastructure of the UK and Ireland businesses will increase profitability, Aviva said. Despite the job losses, Ireland is considered one of the insurer’s 12 core assets and is central to the company’s plans.

Aviva is pursuing a dual strategy of reducing costs, but is also selling off non-core assets.

Earlier this month, it finally completed the £1bn sale of non-core RAC to private equity house Carlyle Group.

Aviva continues to have a number of sale options regarding non-core assets. Jefferies analyst James Shuck said: “They would like to sell the US life business, but there’s quite a lot of credit risk in there. In time that business will be sold.

“Less well known might be the Canadian non-life business. Aviva operates as a composite, and that’s part of its strategy to leverage that composite business model, and it doesn’t have any material life business in Canada.

“It sits slightly strangely with what they’ve said, and they would get a very good price for it.”

Meanwhile, Aviva’s share price continued to climb this week as investors shrugged off doubts about the impact of the eurozone crisis on the insurer.

The share price climbed 4% to 347p, from the week leading up to the time of press on Tuesday.

Panmure Gordon analyst Barrie Cornes dismissed fears that Aviva may need to raise additional capital to cope with a further deterioration of the sovereign debt of eurozone countries.

Aviva has £6.6bn exposure to Italy and a further £1.4bn exposure to peripheral eurozone countries.

Cornes said: “Italian debt would, in our view, have to be written down by 20%-plus for Aviva to consider raising additional funds. It has a much stronger balance sheet than it did in 2007/08.”

Elsewhere in the industry, other insurers are having a harder time coping with the problems of the eurozone sovereign debt deteriorations.

Groupama chief executive Jean Azema was dismissed this week in the wake of a series of downgrades by the rating agencies.

Azema, who was in charge for 11 years, failed to convince regional banks - who are Groupama’s main shareholders - that he was still the man for the job.

Thierry Martel, currently Groupama’s managing director in charge of insurance in France, will take over immediately from Azema.

Groupama had been downgraded by rating agencies and told to beef up its capital to counter junk debt held with Greece and troubled bonds in Portugal.

Last month Standard & Poor’s downgraded the French insurer to ‘BBB’ from ‘BBB+’ with negative implications.

Azema had promised to cut costs before going public in 2015.