The insurer has been in remorseless decline since its 2006 attempt to take over the Prudential. Its shares are down 60 per cent, while the Pru's are up by 40 per cent. That's not all down to superior footwork. Since the credit crunch set in, Asia-oriented Pru was always going to outperform Euro-heavy Aviva. Yet no one would consider Aviva innocent of ineptitude. To add spice, the man atop the Pru's revivification, Tidjane Thiam, was poached from Aviva in the aftermath of that episode. (And for the final relish, Mark Wilson was sacked at AIA by his American bosses for rubbishing the Pru's offer.)
But Mark Wilson will be a lot less occupied with Tidjane Thiam than with his new chairman, John McFarlane, a Scot who earned many plaudits during a decade in charge of ANZ - one of Australia's big four banks. McFarlane was appointed Aviva's chairman in waiting a year ago and it seems clear that from day one he was set upon redefining the wallowing insurer. One might surmise he decided early on that Aviva's previous chief executive Andrew Moss would not last the course, and that perhaps he smiled quietly at Mr Moss's resignation after a pay rise offered by Aviva's woefully generous remuneration committee (No Free Lunch, 3 May 2012) infuriated its big shareholders.
McFarlane immediately took on executive responsibilities and within weeks was touring the City with a 50-page presentation based on the findings of a root and branch review which had clearly been initiated months before right under Andrew Moss' nose. It did not spare Aviva's or Moss's blushes. "Bureaucratic, inefficient, confusing, too many changes of strategy, expanded too far," were just a few of the epithets deployed on page one.
The review divided Aviva into 58 individual businesses based on geography and product, which were then ranked for profits, cash and prospects (Mr McFarlane's presentation is available from Aviva's website). Fifteen businesses representing less than 15 per cent of Aviva's capital employed got the all clear and were tagged "performing". Sixteen, including five large operations emerged as "non-core", which means Mr McFarlane thinks they should be sold. These are utilising twice as much capital as the performers, and indeed their inefficient use of capital was a key factor held against them. The remaining 27 are apparently welcome to stay if their performance can be improved, which in an unspecified number of cases means they actually need to be turned round. These include Aviva's market-leading Irish general insurance operation, its third-party fund management operation and its small Chinese life operation.
In its announcement of Mark Wilson's appointment, Aviva gave unusual detail about his previous career. "He led the AIA transformation strategy… broadened distribution … delivered a new customer centric approach... non-performing or capital intensive businesses were turned round or disposed of. The product portfolio was re-priced, solvency ratios improved and expenses substantially reduced … culture was transformed by removing silos."
On this basis, he's just the man, then. But how does he feel about getting such a detailed and conclusive agenda from John McFarlane? It gives him very little room for manoeuvre. It reaches the parts chief executives expect to reach by themselves. We will find out soon. Wilson starts work on Monday. McFarlane sheds his executive responsibilities as of 1 January. Let's hope these two strong characters will work it out. Or break it up.
