Financial Times
Aviva is to cut 1,800 jobs in an effort to save £300m of costs a year as new chief executive Maurice Tulloch outlined a plan to revitalise the 300-year-old British insurer.
Unveiling details of his strategy on Thursday, Mr Tulloch vowed to “crack the complexity” which he said has been a drag on Aviva’s performance.
Mr Tulloch, who has led the company since March and succeeded Mark Wilson, also confirmed plans to split Aviva’s core UK business into two parts — general insurance and life insurance — reversing a decision in 2017 to run the two together.
Barrie Cornes, an analyst at Panmure Gordon, said the £300m cost-saving target was equivalent to almost 10 per cent of last year’s operating profit. He said news of the cost savings — and the company’s decision to maintain its dividend policy — was*“very positive”.
However, he added:*“We believe more radical changes could come if the cost savings don’t have the desired effect.”
The company employs about 30,000 people. It did not give any details about exactly where the job cuts would be, but Mr Tulloch said they would be around the world and take three years to implement.
He added that, although the company had “strong foundations”, there were opportunities to improve. “Reducing Aviva’s costs is essential to remain competitive and this means tough decisions and job losses, which I do not take lightly.”
In a presentation for investors Aviva said that, while the combination of the two operations had led to some new business wins, especially with corporate clients, it had resulted in complexity and not delivered the expected efficiency benefits.*
The company added that the latest move would allow stronger accountability and greater management focus on the two businesses.
The group’s share price has fallen 23 per cent over the past five years as investors’ initial enthusiasm for Mr Wilson’s restructuring efforts turned to concern about whether Aviva could grow. Aviva’s shares rose 1.4 per cent on Thursday.
Mr Tulloch has already overseen a number of management changes. Andy Briggs, former chief of the UK business, has left, while Aviva on Wednesday said its finance chief, Tom Stoddard, would step down.
Mr Cornes said splitting the UK operation into two “gives Aviva an option to sell its [general insurance] business in future” although Mr Tulloch denied that was part of his plans. The UK life insurance business will be led by Angela Darlington, who has been running the whole UK business since the departure of Andy Briggs in April.
The group’s general insurance business will be run by Colm Holmes, who has been head of Aviva’s Canadian operation since January last year.*
Mr Tulloch also promised to take a tougher line on Aviva’s project spending in areas such as technology, which he said had risen from about £350m a year four years ago to £600m in 2018.
“We built some great kit. We also built some kit that didn’t work out that we could have stopped sooner,” he said.
“I’m not against making big investments . . . but we need to see the benefits coming through sooner,” he added.
He is due to give more details on his long-term strategy for Aviva in another investor presentation in November.
Aviva is to cut 1,800 jobs in an effort to save £300m of costs a year as new chief executive Maurice Tulloch outlined a plan to revitalise the 300-year-old British insurer.
Unveiling details of his strategy on Thursday, Mr Tulloch vowed to “crack the complexity” which he said has been a drag on Aviva’s performance.
Mr Tulloch, who has led the company since March and succeeded Mark Wilson, also confirmed plans to split Aviva’s core UK business into two parts — general insurance and life insurance — reversing a decision in 2017 to run the two together.
Barrie Cornes, an analyst at Panmure Gordon, said the £300m cost-saving target was equivalent to almost 10 per cent of last year’s operating profit. He said news of the cost savings — and the company’s decision to maintain its dividend policy — was*“very positive”.
However, he added:*“We believe more radical changes could come if the cost savings don’t have the desired effect.”
The company employs about 30,000 people. It did not give any details about exactly where the job cuts would be, but Mr Tulloch said they would be around the world and take three years to implement.
He added that, although the company had “strong foundations”, there were opportunities to improve. “Reducing Aviva’s costs is essential to remain competitive and this means tough decisions and job losses, which I do not take lightly.”
In a presentation for investors Aviva said that, while the combination of the two operations had led to some new business wins, especially with corporate clients, it had resulted in complexity and not delivered the expected efficiency benefits.*
The company added that the latest move would allow stronger accountability and greater management focus on the two businesses.
The group’s share price has fallen 23 per cent over the past five years as investors’ initial enthusiasm for Mr Wilson’s restructuring efforts turned to concern about whether Aviva could grow. Aviva’s shares rose 1.4 per cent on Thursday.
Mr Tulloch has already overseen a number of management changes. Andy Briggs, former chief of the UK business, has left, while Aviva on Wednesday said its finance chief, Tom Stoddard, would step down.
Mr Cornes said splitting the UK operation into two “gives Aviva an option to sell its [general insurance] business in future” although Mr Tulloch denied that was part of his plans. The UK life insurance business will be led by Angela Darlington, who has been running the whole UK business since the departure of Andy Briggs in April.
The group’s general insurance business will be run by Colm Holmes, who has been head of Aviva’s Canadian operation since January last year.*
Mr Tulloch also promised to take a tougher line on Aviva’s project spending in areas such as technology, which he said had risen from about £350m a year four years ago to £600m in 2018.
“We built some great kit. We also built some kit that didn’t work out that we could have stopped sooner,” he said.
“I’m not against making big investments . . . but we need to see the benefits coming through sooner,” he added.
He is due to give more details on his long-term strategy for Aviva in another investor presentation in November.
