Aviva’s turnaround led by Amanda Blanc: what’s next?

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The turnaround for British businesses this century has hardly matched the turnaround achieved over the past six years. Aviva.

Prudential, the UK’s second-largest insurance company by market value, is number one, but has had a string of disappointments since its founding in May 2000.

This partially reflects Aviva’s history. The company was formed through the merger of two insurance companies that each date back more than a century: Norwich Union, a 203-year-old life insurance company that was member-owned until 1997, and CGU, which was formed in 1998 through the merger of General Accident and Commercial Union. This combination of essentially three entities resulted in complexity and sprawl.

CEO Richard Harvey, who oversaw the merger, left in 2007 to pursue philanthropic work in Africa. His successor, Andrew Moss, initially focused on shedding peripheral businesses (including, oddly enough, the British Driving School and windscreen auto repair business) and focusing on insurance. He left after five years amid investor dissatisfaction with subpar profit growth and a shareholder revolt over executive compensation.

His successor, Mark Wilson, stayed on for even longer, but when he left there was still discontent among shareholders. His successor, Maurice Tulloch, stepped down after 15 months, citing family health reasons.

This led to Amanda Blanc, former CEO of the UK arm of French insurance giant AXA, joining Aviva in July 2020.

Six years later, it’s safe to say she’s made a wise change of direction.

A key criticism of the Moss and Wilson era was that, in contrast to Prudential, Aviva deployed capital to the struggling economies of Europe rather than fast-growing Asia.

Bran noticed this.

She quickly raised about 8 billion pounds ($10.8 billion) by disposing of eight businesses, exiting markets such as France, Italy and Poland in the process.

Most of it was returned to investors, forming part of the £10bn of capital returned to investors, including dividends, since she took power.

Aviva therefore mainly focuses on three core markets. One is the UK, a leading provider of life and general insurance. It ranks second in property and casualty insurance in Canada and third in Ireland.

Rationalization was completed and organic and acquisitive growth became a priority. The most eye-catching of these was Aviva’s pounce on embattled rival Directline in December 2024, snapping up a fifth of the UK car insurance market for £3.7bn.

Less eye-catching, but still interesting, was the £242m acquisition of Provitas in March 2024. This marks Aviva’s return to the Lloyd’s of London market for the first time in 20 years and complements its growing general and commercial insurance business.

But the burden to growth could soon come from Britain’s wealth. UK wealth currently stands at a market size of £2.7tn, but Aviva predicts it will exceed £4tn by 2030, and the company claims to be the leading player in terms of assets and net flows.

Mr Brann recognized early on that around £6bn worth of pension and legacy assets were leaving Aviva each year and being invested in rival companies.

She reasoned that by enhancing the advice function, more advice could be retained. Therefore, she acquired financial advisory business Succession Wealth in 2022 for £385m. It is predicted that wealth will soon account for one-tenth of income.

An update is expected when Aviva releases its half-year results this Friday. Analysts expect first-half operating profits to be around £1.3bn (up 17.5% on the same period last year), with the UK and Ireland general insurance division posting the biggest growth, thanks in part to Direct Line. Shareholders still have questions.

The performance of some Aviva Investors funds, such as the UK-listed Equity Unconstrained Fund and the Global Equity Endurance Fund, has been mixed. In the long term, there are concerns about what self-driving cars will mean for auto insurance companies.

And there are even concerns in some quarters that Aviva now resembles a European general insurance company like Allianz or AXA rather than a traditional British life insurer, recalling memories of the conglomerate discounts that plagued Brann’s predecessors.

But those are probably questions for a later date. Aviva shares have risen around 150% since Mr Brann took over, music to the ears of the 500,000 retail investors who own the shares as a legacy of the Norwich union era.

It is not only one of the most widely owned companies in the UK market; With around 22 million customers in the UK, Aviva currently has the second largest customer base of any bank or insurance company in the country, after Lloyds Banking Group.

So we expect this particular insurance company’s results to attract more attention than a sleepy Friday in August.

— Ian King

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