A powerful group of institutional investors is urging Aviva to accelerate an overhaul of its strategy as the FTSE-100 insurer faces renewed discontent in the City over its performance.
Daily Week News has learnt that the Investor Forum, whose members collectively manage assets worth about £21trn, has told Aviva that it must set out a credible long-term plan to increase its value later this week.
The Forum, which has established itself during the last five years as one of the City’s most important platforms for engagement between large shareholders and major companies, is understood to have written to Aviva within the last few weeks.
The move is a bold one, given that Aviva’s own asset management arm, Aviva Investors, is one of roughly 50 full members of the Investor Forum.
People close to Aviva, which is among Britain’s biggest insurance companies, acknowledged that the company had recently received a letter from the group which said it represented the views of 15% of the company’s shareholder base.
One source said the letter urged Aviva’s board, which is chaired by the City grandee Sir Adrian Montague, to explore plans to reduce its debt-pile and address the challenges in its life insurance book.
It also encouraged the company to think about its scale in a global insurance industry increasingly dominated by companies much larger than Aviva.
The move has emerged less than 24 hours before Maurice Tulloch, Aviva’s new chief executive, is due to provide his most comprehensive views about the company’s strategy since his appointment in March.
Investors responded negatively to the disclosure earlier this week that Mr Tulloch would retain Aviva’s general insurance operations in China and Singapore, sending the company’s shares down 5%.
The City had expected those assets to be disposed of alongside the rest of its Asian business.
Mr Tulloch’s decision to keep part of the division has raised questions about how radical Wednesday’s strategic update is likely to be.
The Investor Forum’s letter to Aviva underlines the scale of anxiety among leading shareholders about its direction after years of mediocrity.
Its intervention ahead of the company’s capital markets day is a rarity for the body, which has engaged with dozens of companies in a bid to improve transparency, corporate governance and financial performance during its five-year existence.
However, it has seldom engaged with a blue-chip corporate name that is also among its own key members in an effort to expedite significant changes.
Aviva has long-been viewed as a logical break-up candidate, with analysts and shareholders arguing that its ‘composite insurance’ model acts as a drag on earnings.
Richard Buxton, the leading fund manager who is chief investment officer of Merian Global Investors, told The Sunday Times at the weekend that he had a clear message to Aviva’s management: “If you didn’t exist, no-onw would create you now.”
During the last 12 months, Aviva’s shares have risen by just under 2%, giving the company a market capitalisation of almost £16.25bn.
Mark Wilson, Mr Tulloch’s predecessor, was ousted in October 2018
Aviva CEO Maurice Tulloch is due to present on the company’s strategy
Since Mr Tulloch’s appointment, he has announced sweeping changes to the insurer’s executive team, with Andy Briggs, the former boss of its UK arm, last week resurfacing as the next boss of Phoenix Group, the consolidator of closed-life assurance funds.
The UK life insurance and general insurance operations have been split up, with new executives appointed to run functions such as human resources.
One analyst, who did not want to be named, said that Aviva had a “clear problem given its huge dividend yield and chain of executive departures”.
“Something either isn’t working or isn’t believed by the market, and they need to resolve that.”
Aviva and the Investor Forum both declined to comment.