Posted on May 18, 2012 by Sergio Ulloa
London based insurance company Aviva is now the sixth largest insurance group worldwide and the largest provider of life and general insurance in the United Kingdom.
Despite having a strong start to the year so far, Aviva will be undertaking a much needed strategic review of its businesses to aid the company in its recovery after the departure of Chief Executive Officer Andrew Moss.
Moss, having held his position since 2007 stepped down on the 8th
of May after the shareholder's unhappiness at his pay and performance was making it too difficult for him to continue in a successful manner.
Now in charge, executive deputy chairman John McFarlane has been set with a number of tasks with priority residing in acquiring a new CEO. McFarlane reports this could take the rest of the year as it is paramount that an excellent candidate is selected so as previous events are not repeated. However, with Aviva share prices already down 10% since the departure of Andrew Moss, it would seem McFarlane needs to act with greater urgency.
In addition, McFarlane has been developing strategies to improve Aviva's current condition which he hopes will be put in motion by July. The acting CEO plans to have Aviva reconsider its investments in 45 business units so as to ensure the company can improve performance in businesses that offer sufficient promise for the future and rid themselves of those that do not. He hopes this will enable Aviva to strengthen its capital base and boost share prices, especially as recent reports are reflecting the increasingly tough conditions the euro crisis is bringing about for the company.
Continuing with the trend of the last 5 years, Aviva has underperformed rivals Prudential and L&G with stocks decreasing by 8% since the beginning of the year. The Euro zone crisis has of course taken its toll on their rival companies as well but as Aviva generated 40% of its operating profit last year in Europe alone, it appears to be feeling more of an impact and has already seen a 5% drop in its life insurance sales so far this year.
Spain and Italy in particular, have been hit hard by the recession where reports in Life and Pension sales reflected an overall 23% decrease.
Worldwide, Aviva's total sales, which include general insurance premiums, were down 3% at a total of 15.3 billion US Dollars but on a positive note, the company's asset management funds have seen a healthy inflow of 1.6 billion US dollars in the first quarter alone.
The recession is making life difficult for all European citizens, including Aviva's own employees. Aviva Ireland mentioned last week that between 500 to 540 redundancies will unfortunately be enforced due to the current economic climate in the Euro Zone.
Like other companies involved with Europe, It appears that the Aviva group will continue to struggle in certain areas until the business landscape becomes more stable. In the mean time, it is clear the company requires a positive management situation to assist them in moving forward and overcoming whichever obstacles the recession will undoubtedly create.