Aviva ditches €2bn of Italian debt and 16 businesses

Aviva has unveiled its eagerly anticipated strategic review, which it hopes will keep shareholders off its back by cutting costs by £400 million.

The review comes on intense pressure at the firm following the ‘shareholder spring’, which saw former chief executive Andrew Moss lose his job.

In an announcement to the Stock Exchange this morning, the insurer’s chairman, John McFarlane (pictured), said the new strategy would cut costs by around £400 million and had three objectives:

* Narrow focus: focus on fewer business segments where it believes can produce attractive returns and with a high probability of success.

* Build financial strength: achieve target economic capital levels in line with its industry peers, reduce capital volatility, and bring leverage down to a conservative level.

* Improve financial performance: aim to deliver a higher level of revenue growth, a lower cost-income ratio, lower losses and claims and higher return on capital, notwithstanding the subdued economic environment in developed markets.

Not so sweet 16

Aviva has conducted a full review of its 58 business and identified 15 core areas, which are performing above expectation. These include its UK Life Protection arm.

Meanwhile, it highlighted 27 businesses in need of improvement, including its general insurance arm.

The remaining 16 businesses have been identified as non-core, which it will exit. This segment contains £6 billion in assets, accounting for around £300 million in pre-tax profit. It includes its UK-large scale bulk purchase annuities business and small Italian partnerships.

‘We are putting in place a management structure to achieve the required improvements in performance and return and we have made a separate announcement on this today. We have also appointed investment bank advisors for certain disposals,’ McFarlane said.