Posted by News from ABP on 23/12/19:
A report in the Telegraph says that a boardroom row has erupted at Aviva over its refusal to trigger a radical break-up plan designed to drag the insurer out of its prolonged stock market slump.
It is understood that some of its top directors have been pushing for the struggling FTSE-100 insurer to consider splitting itself in two amid concerns that it could become the target of an aggressive activist investor.
Senior City sources say such a bold move could boost Aviva’s flagging stock market value by as much as £3bn and see off the possible threat of an activist campaign from a powerful Wall Street agitator such as Elliott Management or Carl Icahn.
The company is currently valued at £16.3bn on the London stock exchange.
A break-up was considered in detail before new boss Maurice Tulloch presented his strategy to investors last month.
Yet despite significant support for a separation to be examined further, the 50-year-old chose instead to keep the company intact and pursue a more conservative shake-up to simplify its existing structure.
Aviva’s share price fell more than 4% as investors reacted badly to the watered-down announcement.
The City was hoping for a much more ambitious approach with its share price lower than it was 25 years ago.
Tulloch wants to reorganise the group from 14 markets to five new divisions.
He also announced plans to invest £1.3bn over three years while protecting the dividend and cutting debt.
Asked about the possibility of a break-up, Tulloch admitted it had been looked at.
“As part of my strategic review, I left no stone unturned”, he said, but added the conclusion was “we’re stronger together”.
However, Paul De’Ath, an analyst at Shore Capital, said Aviva “must try harder”.
The break-up proposal, drawn up with the help of several investment banks, involved carving out the company’s general insurance arm from its life insurance division and either a separate stock market listing for the business, or a sale to a big rival such as RSA.
Insiders say the two businesses make awkward bedfellows because few customers who take out life insurance with Aviva also buy home or car cover.
Legal and General offloaded its general insurance division to Allianz earlier this year and Prudential is in the final stages of carving itself into two parts, one focused on the UK, and another on Asia.
There was support for the move among both non-executive and executive board members.
It is understood the decision not to investigate it further dismayed some of those in favour, and was a major factor in the recent resignation of senior independent director Glyn Barker.
The departure of Barker, the former chairman of outsourcer Interserve, was announced at the beginning of the month and he will leave at the end of December.
It is believed that Claudia Arnia, another non-executive who stepped down on the same day, was also supportive of the plan being explored in more detail.
On Friday Aviva announced that George Culmer, the former finance chief of Lloyds Banking Group, will take over from Mr Barker as senior independent director.
Former UK boss Andy Briggs reportedly pitched the break-up plan to the board earlier in the year when he was in the running for the top job.
He resigned when Tulloch, an Aviva lifer and the former chief executive of its international arm, pipped him to it.
Aviva was created by the three-way combination of Norwich Union, General Accident, and Commercial Union in 1998.
It boasts 33m customers worldwide and 30,000 employees, and has large operations in Canada, Europe and Asia.
Aviva declined to comment.