Cevian, Europe’s largest activist investor, has asked Aviva to return £ 5bn in excess capital to shareholders next year after building a nearly 5% stake in the FTSE 100 insurance company.
Rather than organizing a change of leadership at the top of the London-listed group, Cevian is pushing executive director Amanda Blanc to build on the set of provisions she announced since she took over nearly a year ago. .
Aviva agreed last year to sell eight non-core companies, raising nearly £ 8bn, in an attempt to refocus on the UK, Irish and Canadian markets. The global ambitions pursued by previous leaders have been criticized by some analysts as blurry and leaving the group with an overly large cost base.
“Aviva has been mismanaged for several years, and its high-quality core businesses have been hampered by high costs and a number of poor strategic decisions,” Christer Gardell, co-founder of Cevian, said Tuesday.
The company “has the potential to become a focused and well-capitalized market leader that produces profitable growth, generates numerous funds, and is highly valued in the stock markets,” he added.
Cevian, which manages more than $ 16 billion on behalf of about 350 pension funds, endowments and other global investors, began building its Aviva stake earlier this year, according to a person familiar with the matter. With a holder of 4.95 percent, the Swedish group is now Aviva’s second largest shareholder after BlackRock.
Aviva has promised substantial returns and cost reductions as central tables of its change of strategy under Blanc, which has told investors that its mantra will move quickly.
However, Cevian believes the cost reduction could go further, demanding reductions of more than £ 500 million from Aviva’s annual cost base by 2023, compared to the £ 300 million management goal. According to a person familiar with the matter, it promotes a leaner management structure.
Aviva’s share price of just over £ 4 should rise to more than £ 8 in three years, based on a doubling of the full-year dividend to 45p, Cevian estimates. The insurer could also profit if interest rates start to rise, the activist fund said.
Shares of Aviva traded seven times ahead of earnings, according to Capital IQ data, a discount to British rivals including Legal & General, Phoenix Group and Direct Line, which trade at nine times and above.
There have been constructive discussions between Cevian and Aviva’s management in recent months, according to people familiar with the matter, who added that the fund was not currently pushing for a council position.
Aviva said it had made “significant strategic progress over the last 11 months” and was “very focused” on improving its performance.
“We engage regularly with investors and welcome any thoughts that move us toward our goal of providing value to the stock in the long run,” he added.
Aviva is not the first British insurer destined for Cevian. The fund ran a multi-year campaign against rival RSA, which ended its sale to Intact of Canada and Tryg of Denmark last week.
Cevian, who calls himself a “constructive activist,” has typically owned a stake for about five years, and has shares between 10 and 15 companies.