Aviva mulls selling Asian arm

Pedro Gonçalves
Aviva mulls selling Asian arm

Aviva is studying selling its Asian division as it seeks to simplify its business and boost growth under the guidance of new chief executive Maurice Tulloch.

The company has operations across Asia, including Hong Kong, China, Singapore and Indonesia, but bankers say they are not seen as a core part of the group. They could be worth more than $2bn, Reuters has reported. 

"Aviva's businesses in Asia have excellent growth and earnings potential and we are considering a range of options to help these businesses reach their potential," Tulloch said.

I think we can do much better and that is why I took the job in the first place"

Tulloch signalled that a sale was not inevitable. "There are lots of different options," he said, and the company could instead form a joint venture with a local player.

Tulloch has already shaken up the strategy since taking on the chief executive role in March. He has split the core UK operation in two, separating the life insurance and general insurance businesses, and has unveiled plans to save £300m a year by cutting 1,800 jobs.

He is set to give more details of his shake-up, alongside new financial targets, at an investor day in November. "I've taken this role to change Aviva," he said. "I want Aviva to be a simpler company."

Aviva's overall operating profit rose 1% to £1.45bn in the six months to June 30. "I think we can do much better and that is why I took the job in the first place," Tulloch said.

That was driven by a strong result in general insurance, which more than offset weakness in Fund Management and the lack of longevity reserve releases in Life Insurance.

Profits from general insurance improved by 29% thanks to a recovery in Canada and lower weather-related claims, but life insurance profits were down 8%, with the company blaming tough competition in the UK. Profits from Aviva Investors, the fund management business, slipped 18% as average assets under management fell compared with the same period last year.

The value of new business in Asia and in Aviva Investors, its fund management arm, rose 4% to £102m. The value of new business in other regions fell.

"Overall, Aviva's got solid foundations. However, with Tulloch promising more of the same, and debt repayments set to soak up plenty of cash over the next couple of years, top line growth looks like it will be taking a back seat. Given that fact, we think the dividend potential remains the main reason to hold the shares," said a note by Hargreaves Lansdown.

The dividend was increased by 3% to 9.5p per share.


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