Business Review to Come as Aviva CEO Steps Down
May 10, 2012 by Meg Green
Best’s News Service – May 08, 2012 02:37 PM
LONDON – Aviva plc said Andrew Moss, chief executive officer, will be leaving the group immediately and his interim successor is promising a good hard look at the company’s businesses.
Chairman-designate John McFarlane will become interim executive deputy chairman immediately, and executive chairman on July 1 pending the appointment of a new CEO.
McFarlane said he would launch an in-depth, thorough review of all Aviva’s businesses and investments to “ensure we are focused on attractive segments, that have a meaningful market position, where we can generate superior returns over the cycle, and where we are confident of success.”
Also, he said he plans to focus on building the company’s financial strength and improving performance, while also improving customer service “and developing talent and leadership in our people, building the trust in which Aviva is held by shareholders, business partners, regulators and the communities where we operate.”
The move follows a majority of shareholders voting against the company’s salary plan last week in a nonbinding vote. Also, last month, Aviva said three top executives were leaving as it sought to focus on a smaller number of high-growth markets (Best’s News Service, April 19, 2012).
“Given the recent headlines, it should not come as a surprise that the hugely unpopular CEO Andrew Moss has stepped down as CEO,” Barrie Cornes, an equity analyst with Panmure Gordon & Co., said in a research note. “That said, we thought that he might have toughed it out until the Chairman Designate John McFarlane actually got his feet under his new desk. We suspect that the latest batch of negative headlines over the remuneration report at the [annual general meeting] was the last straw and Moss had to go. Few will shed any tears given his handling of the business over the last few years, which have seen the shares massively underperform the sector.”
Moss will receive about 1.75 million pounds (US$2.8 million) in severance pay, which includes his 12-month salary, a lump settlement, pension contribution, and 75% of the Aviva shares awarded to him in 2009. According to a statement from Aviva, 25% of the shares awarded to him in 2009, and all the shares awarded in 2010 and 2011, will lapse.
In a statement, Aviva’s chairman, Colin Sharman, said Moss had approached him with the decision that he felt it was in the best interests of the company that he step aside to make way for new leadership. He has offered to assist in any way he can to ensure a smooth transition, Sharman said.
Sharman spoke highly of Moss. “Through the global financial crisis he led the consolidation of our international presence and the integration of 40 brands into the very powerful single Aviva brand. He reduced the cost base, improved operational performance and more recently began the implementation of the strategic focus, with the sale of RAC, the de-consolidation of Delta Lloyd and a number of overseas disposals,” Sharman said in a statement.
The company had 10.57 billion pounds in net written premiums at year-end 2007, dropping to 9.16 billion pounds at year-end 2011, according to BestLink, A.M. Best’s online financial system.
Last year, Aviva plc agreed to sell RAC Ltd., the second-largest roadside assistance company in the United Kingdom, to the U.S.-based Carlyle Group, a private global investment firm, for 1 billion pounds (Best’s News Service, June 23, 2011).
In April, the U.K.-based multiple-line insurer said it removed “the regional layer of our structure” because the group operates in fewer countries than it once did. Three current segment CEOs will be leaving the group as part of the change. Igal Mayer, who had held a number of roles with Aviva over many years, resigned from the board as an executive director and will be leaving in early May. He has been CEO of Aviva Europe since January 2011. Richard Hoskins, CEO for North America, will also leave Aviva. Alain Dromer, CEO of Aviva Investors, will be replaced.
The investor presentation scheduled for May 24 will be postponed until after the board’s annual strategy meeting in June, but will take place before the group’s interim results are released, the company said.
McFarlane joined the board of the Royal Bank of Scotland Group plc as a nonexecutive director in October 2007, one month after retiring as CEO of Australia and New Zealand Banking Group Ltd., a post he held for 10 years. After five years with Ford, McFarlane entered banking in 1975, and spent 18 years with Citibank in London, heading Citicorp Investment Bank Ltd. and ultimately Citicorp/Citibank in the UK and Ireland. In 1993 he joined the board of Standard Chartered plc as a group executive director, responsible initially for group strategy, risk, treasury, and institutional banking, later for northeast Asia based in Hong Kong, and subsequently for South Asia, Middle East, Africa, Europe and the Americas.
Aviva’s stock price on the London Stock Exchange was trading up 0.2% to 302.9 pence, on May 8. The stock is down 32.9% from its year-to-date high of 450.3 pence a share on May 3, 2011.
Aviva’s subsidiaries currently have Best’s Financial Strength Ratings of A (Excellent), under review with negative implications. The group has exposure to a prolonged adverse economic environment within the eurozone. Of particular concern to A.M. Best is the exposure to Italy and Spain’s sovereign bonds and the potential for contagion into other asset classes, particularly holdings of European bank securities.
(By Meg Green, senior associate editor, BestWeek: Meg.Green@ambest.com) BN-NJ-05-08-2012 1437 ET #
