Aviva unveils strategic plan to shake up business, appoints Canadian CEO to group executive

The United Kingdom’s second largest insurer, Aviva, is launching an ambitious plan to narrow its focus, build financial strength and improve performance after a turbulent past few months that saw the departure of former chief executive Andrew Moss in early May.

Aviva announced the changes July 5 in London, which include a sharper division of the company’s 58 business segments into “performing, improve or non-core” categories, according to new chairman John McFarlane. The company will be exiting 16 non-core business segments that are “currently producing returns below the group’s required return.” McFarlane cited South Korea, UK bulk purchase annuities and small Italian partnerships as units that will be sold. No mention was made of other possible business unit sales, although analyst reports have identified Aviva’s U.S. life insurance business as a possible target.

Canada’s “personal property” insurance was identified as one of 15 “performing” segments with “unusually high return or growth.” Aviva Canada president and CEO Maurice Tulloch was appointed to the group executive team of the parent company Aviva plc. on July 5.

In all, 27 segments, such as Ireland General Insurance, were pinpointed as “improve” units that “will require significant improvement.”

To build up the financial strength of Aviva, McFarlane also announced “new target economic capital levels of 160% to 175% of required capital that will require additional capital to be released.” He acknowledged shareholder concern that the company is too exposed to the eurozone crisis and has spent £1.3 billion ($2 billion) on restructuring changes over the past five years.

In addition, the company plans to cut expenses by £400 million ($630 million) by 2014, which will involve a reduction in management layers “between the CEO and operational staff from 9 to 5 levels,” McFarlane noted. Other areas designed to improve performance include new revenue growth in developed markets, a dynamic capital allocation program across the group and a cultural change initiative to achieve “more rigorous performance management.”

Former chief executive Andrew Moss resigned from Aviva on May 8 after shareholder pressure over his pay and the insurer’s performance. The company announced that a new chief executive will be appointed at the start of 2013.