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Tulloch vows to crack “complex” Aviva

Sustainability and security of the dividend in focus for the insurer’s new chief executive
June 12, 2019

Dividend stalwart Aviva (AV.) is betting on an organisational shake-up, job cuts, and a focus on debt repayments in a bid to improve the “sustainability and security” of the insurance giant’s payout. In his first major intervention since taking the top job in March, chief executive Maurice Tulloch told investors he was “determined to crack Aviva's complexity, an issue which has held back our performance for too long”.

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Those investors may also experience a sense of déja vu. Both of Mr Tulloch’s most recent predecessors – Mark Wilson and Andrew Moss – made similar overtures to restructure the group, focus business lines and improve profitability.

In a presentation to analysts and investors, the chief executive painted the group’s distributions, insurance expertise and balance sheet as “strong foundations”, but said there are “clear opportunities to improve”. For Mr Tulloch, that starts with the core UK insurance business, which was better co-ordinated and customer-facing, but overly complex and inefficient. It will now be split back into separate life and non-life (or general) divisions, which Aviva hopes will improve competitiveness and performance.

In a bid to improve efficiency and reduce expenses by £300m a year by 2022, Aviva has also begun consultations to lay off 1,800 of its 30,000-strong global workforce. Shore Capital analyst Paul De’Ath, who was already forecasting £170m of cost reductions in the next three years, suggested the cuts could “potentially add around 5 per cent to pre-tax earnings in 2022”. Those plans would also support a plan to reduce debt by at least £1.5bn by 2022, freeing up excess cash to support the group’s progressive dividend policy.

Trading for the year to date is reported as “broadly consistent with 2018”, as weaker performance in savings and asset management has been partly offset by growth in Europe and Asia, and a rebound in Canada.