New Aviva chief executive Maurice Tulloch stamps his mark on the business by breaking up the UK GI and Life businesses and starting on a £300m efficiency drive
Aviva has announced that its life and general insurance businesses will return to being separately managed in the UK.
Colm Holmes has been appointed as chief executive of the GI business. Aviva’s digital direct business will be integrated into the GI business as part of the shake-up.
On the UK Life side, Angela Darlington was appointed its interim chief executive.
In its investor presentation, it was claimed that bringing the two sides of the business together had not delivered the expected efficiency benefits, and had introduced more complexity to the structure.
New chief executive Maurice Tulloch said that reducing Aviva’s costs was “essential to remain competitive”, as Aviva announced it also wants to reduce expenses by £300m a year by 2022.
It is looking to achieve this by cutting 1,800 jobs out of its current global workforce of 30,000.
Other savings will be achieved through lower central costs, savings in contractor and consultant spend, reduction in project expenditure and other efficiencies, the company said. Aviva expects to spend £300m over 2019-2021 to acheive these savings.
Aviva stated it will look to keep redundancies to a minimum, and try to reduce roles as much as possible through natural turnover.
Tulloch makes his mark
Tulloch said: “Today is the first step in our plan to make Aviva simpler, more competitive and more commercial. We have strong foundations: excellent distribution, world class insurance expertise, and our balance sheet is robust.
“But there are also clear opportunities to improve. Reducing Aviva’s costs is essential to remain competitive and this means tough decisions and job losses which I do not take lightly. We will do all we can to minimise redundancies and support people through this.
“I am also determined to crack Aviva’s complexity, an issue which has held back our performance for too long. Today’s changes will begin to reduce complexity, cost and duplication, enabling Aviva to be better at serving our customers and delivering stronger results for our shareholders.
“The sustainability and security of our dividend is paramount. We are foucsed on improving our performance to grow capital generation and cash-flow.”
Market reaction
Investors reacted positively, which the company’s share price up moderately by lunchtime.
Ratings agency Moody’s also took a cautiously optimistic view of the announcements. Analyst Helena Kingsley-Tomkins viewed favourably ”the group’s continued commitment to deleveraging, via a debt reduction of at least £1.5bn, and announcement of a £300m per-annum cost saving target by 2022.
”Cost reduction, driven by more focused capex spending and through the streamlining of central functions, including a 1,800 head count reduction, should support operating profits. Moody’s expects the cost reduction will be focused, and won’t impinge on Aviva’s future growth,” she said.
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