One Aviva, but too many unwieldy businesses

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Four years ago Andrew Moss, Aviva chief executive, unveiled his “one Aviva, twice the value” programme in an effort to make the company an easier sell to investors and give the share price a bit of oomph.

Thursday’s first-half results demonstrate how far he has come. The group is now a slightly easier sell – with the recent disposals of the RAC and a stake in Delta Lloyd, a Netherlands-based financial services group, Aviva says that for the first time investors have a clear view of what its future looks like. It has decent positions in life and general insurance in the UK and Europe, with access to more exciting markets elsewhere.

Unfortunately for Mr Moss, investors do not seem to care. The shares have underperformed both the FTSE 100 and peers such as Prudential and Legal & General in the year to date and over one, three and five years.

That is because, while Aviva is tidier than it used to be, it is still a lot less tidy than the likes of the Pru and L&G on the life assurance side, and RSA on the general insurance side. By buying shares in more focused companies, you can pick and choose how much exposure you want to specific markets. By buying shares in Aviva, you’re stuck with Mr Moss’s choice.

So is it time for more radical change? The most obvious move would be to split life assurance from the general insurance business. Demergers are this season’s corporate fashion statement and a split would make life easier for investors.

There are drawbacks to such a radical move, though. The conglomerate structure has financial advantages, such as allowing the group to use cash generated by general insurance to invest in growing markets elsewhere.

But even if a demerger proves to be too difficult, there is scope for a more urgent shake-up. Aviva is still unwieldy, with too many businesses – such as some of its smaller emerging markets operations – contributing little to the overall picture. Their absence would give it a clearer story to tell.

RSA springboard

One insurer that had a very clear story to tell on Thursday was RSA, with the news that Andy Haste, chief executive, is to leave after eight years in the job.

He has built up quite a record. When he took over, RSA was a sprawling conglomerate in deep trouble. Through a series of disposals, including the UK life assurance operations and the US business, he turned things round and then started to invest in emerging markets. His most notable failure was an attempt to buy some of Aviva’s general insurance operations last year.

The gossip in insurance circles will inevitably turn to what Mr Haste does next. The man himself is coy, insisting that he has no specific plans but still has enthusiasm for business challenges.

Having proved that he has what it takes to turn round an unloved insurance group, speculation will surely centre on whether Aviva is next in line.

Misys half-turned

On one level, it does not matter to Mike Lawrie, chief executive of Misys, that a potential deal with Fidelity National Information Services fell through. The bid talks elevated the Misys share price above 400p for more than 20 days so Mr Lawrie now looks likely to receive all the share options he was granted when he took the helm in 2006.

But there must be frustration at a job unfinished. Mr Lawrie came in five years ago to turn round and sell a UK business seen as something of a basket case. ValueAct, the activist shareholder that owns 20 per cent of Misys, was keen to extract value from the company within about five years. The time is almost up but only half the job is done.

Mr Lawrie beefed up the healthcare software business and sold the division two years later for £670m. Most of the money was returned to shareholders.

The remaining banking business has been tougher to shift. Analysts cite plenty of potential buyers, from Oracle to Temenos, but Fidelity was the only bidder. It has now looked at Misys twice and decided to walk away. The dispute this time was over price.

Misys still has to prove its business has truly turned round. It has introduced a new software platform, BankFusion, but so far has just 40 customers. The acquisition of Sophis, an Irish rival, still has to be bedded in. In another year or so, if growth continues, Misys could be in a stronger position to ask for the 450p a share it is thought to have been looking for. The company will undoubtedly try again to find a buyer.

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