Activist investor Cevian Capital says Aviva is expected to return £ 5bn ($ 7.08bn) of excess capital in 2022 after revealing it had built up a nearly 5% stake in the UK insurer , putting new CEO Amanda Blanc under pressure to speed up the pace of disposals.
Aviva, which has sold eight companies since Blanc’s appointment as CEO in July 2020, said last month it had raised £ 7.5bn through divestitures and planned to return money to shareholders, without quantifying .
“Aviva has been mismanaged for many years, and its high-quality core business has been held back by high costs and a series of bad strategic decisions,” said Christer Gardell, Managing Partner and Co-Founder of Cevian in a communicated.
Aviva is expected to be worth more than £ 8 a share within three years, and more than double its dividend at 45 pence, Cevian said.
Aviva shares are currently trading at just over 4 pounds a share and rose 3.3% on the news.
Cevian also said he envisions further cost reduction, totaling at least £ 500 million by 2023. Aviva presented a strategy last year that included £ 300 million in cost cuts by 2022.
“Aviva has made significant strategic progress over the past 11 months and we remain strongly focused on improving our performance,” an Aviva spokesperson said in an emailed statement.
“We engage with investors regularly and welcome any ideas that bring us closer to our goal of creating long-term shareholder value. “
Analysts said the insurer would have between £ 3.7 billion and £ 6.6 billion in excess capital after the asset sales were finalized.
Cevian bought a stake in rival insurer RSA in 2013, which it increased to 15%, culminating in the final week of the sale of RSA to Danish Tryg (TRYG.CO) and Canadian Intact Financial (IFC .TO).
Cevian began to take a stake in Aviva several months ago, with cordial relations between the investor and the management of Aviva, according to two sources familiar with the matter.
President George Culmer and CEO White are “committed to delivering substantial shareholder value,” Cevian said in the statement.
Aviva has focused on the key markets of Great Britain, Canada and Ireland since the asset sale.
Industry sources have speculated that the insurer could make other changes, such as selling closed life insurance portfolios to new clients. The Canadian unit could also attract buyers, they said.
($ 1 = 0.7063 pounds)
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