Broker CEO Forum: Aviva needs to keep brokers ‘sweet’ following business disposals

Broker CEO Forum 2021: Aviva needs to keep the UK broking market “sweet” because “frankly [it does not] have anything else” after completing a roster of international divestments in line with the insurer’s strategy to home in on the UK, Ireland and Canada markets.

Aviva’s direction of travel was one topic of discussion at this month’s Broker CEO Forum, hosted by Insurance Times on Thursday 21 October 2021 at Pennyhill Park Hotel and Spa.

One commentator at the event said Aviva has “been a mess for years”. Following veteran Amanda Blanc’s appointment to lead the business in July 2020, industry participants therefore held “a big hope” that she was going to “sort” the firm out.

However, in summer 2020, the chief executive instead confirmed a new strategy which would see the business go on to sell a number of its global operations, including those in Italy, Poland, Turkey and Vietnam, to name a few. A total of eight disposals have accumulated around £7.5bn for Aviva.

Although Broker CEO Forum attendees understood the thinking behind Blanc’s plan to eliminate “low hanging fruit”, they queried what Aviva would actually be left with following the sales.

One delegate said: “[Aviva] has been a huge disappointment for shareholders over the years.

“As a standalone with the UK, Canada and Ireland, its simply not big enough to stand on its own and probably in two or three years’ time, it will do what RSA has done and ultimately get taken out.”

In August 2021, Blanc pledged to return at least £4bn to shareholders by June 2022 – in part thanks to the funds raised during the divestments.

A commentator estimated that Aviva will return around £3.7bn to its shareholders in quarter two or three next year, although they acknowledged that “shareholders have never loved Aviva”.

Potential options

Mulling the various routes Aviva could take next, one attendee suggested the insurer could demerge its UK life and general insurance businesses to no longer operate a composite model.

Although an intercompany loan previously prevented the potential break up of the business, the size of the loan is now smaller, removing this roadblock.

Plus, composite operating models are “difficult to work” in the UK insurance market due to it being “highly intermediated” and “fragmented” – this makes it harder to cross-sell.

The alternative, according to the delegate, would be to start talks with RSA’s new parent company, Canadian insurer Intact Financial Corporation.

The attendee proposed that Intact could successfully take Aviva’s Canadian business in exchange for handing over the reins of RSA’s UK operations to Aviva. This would “work quite well”, they said.