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Cevian, Europe’s largest activist investor, has asked Aviva to return the excess capital of £ 5bn to shareholders next year after building a nearly 5% stake in insurer FTSE 100 next year.
Instead of claiming a change of leadership at the top of the London-listed group, Cevian is pushing CEO Amanda Blanc to build a series of provisions she announced almost a year ago.
Aviva has agreed last year to sell eight non-core businesses, raising nearly £ 8bn, in a bid to target markets in the UK, Ireland and Canada. Some analysts criticized the global intentions achieved by previous CEOs that they were not focused and that they were leaving the group with too much cost base.
“Aviva has been mismanaged for many years, and high-quality core businesses have been held back by high costs and some bad strategic decisions,” Cevian founder Christer Gardell said Tuesday.
The company “has the potential to be a focused and well-capitalized market leader that generates profitable growth, generates significant money and is highly valued in the stock markets,” he added.
Cevian, which manages more than $ 16 billion on behalf of 350 pension funds, endowments and other global investors, began its stake in Aviva earlier this year, according to a person familiar with the matter. With a 4.95 percent stake, the Swedish team is now the second largest shareholder in Aviva after BlackRock.
Aviva has promised large returns and cost reductions under Blanc as the central board for strategy change, which has told investors that its mantra is moving fast.
However, Cevian believes the cost reduction could go beyond that, requiring a reduction of more than £ 500 million above Aviva’s annual cost base by 2023, compared to management putting £ 300 million. According to one person who knows the subject, he is pushing for a lighter management structure.
Civian has calculated that Aviva’s share price should rise to more than £ 4 in more than 8 years within three years, based on more than doubling the full-year dividend to 45p. The insurer can benefit if interest rates start to rise, the activist fund said.
Aviva’s shares trade profits seven times, according to data from Capital IQ, a discount that the UK rivals Legal & General, Phoenix Group and Direct Line, trade nine times and more.
In recent months there have been constructive discussions between Cevian and Aviva’s management, according to people who knew the subject, and added that the fund does not currently promote a management position.
Aviva said it has made “significant strategic advances over the past 11 months” and remains “focused” on improving its performance.
“We are in constant contact with investors and accept any thoughts that lead us to the goal of providing long-term shareholder value,” he added.
Aviva is not the first UK insurer run by Cevian. The fund launched a multi-year campaign against rival RSA, which ended its sale last week to Intact in Canada and Tryg in Denmark.
Cevian, himself a “constructive activist,” typically owns the stake for about five years, and has stakes of between 10 and 15 companies.
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