Cevian increases its stake in Aviva to drive cost cuts and pay 5 billion pounds

Cevian, Europe’s largest activist investor, already holds a 5% stake in Aviva and is putting pressure on the FTSE 100 index insurance company to further cut costs and return £5 billion to shareholders.

“For many years, Aviva has been poorly managed, and its high-quality core business has been hampered by high costs and a series of poor strategic decisions,” said Christer Gardell, co-founder of Cevian.

After Cevian issued a statement on Tuesday morning, Aviva shares rose 3.3% to 4.24 pounds.

Cevian did not urge the top leadership of the London-listed group to change leadership, but instead urged CEO Amanda Blanc to build on the series of resolutions announced since she took over. About a year ago.

Aviva has agreed in the past year Sell Eight non-core businesses raised nearly £8 billion in an attempt to refocus on the UK, Irish and Canadian markets. Some analysts criticized the lack of focus of the global ambitions pursued by its predecessor CEO, making the group’s cost base too large.

Gardell stated that the company “has the potential to become a focused and well-capitalized market leader that can achieve profitable growth, generate large amounts of cash, and is highly appreciated in the stock market.”

According to people familiar with the matter, Cevian manages more than $16 billion in assets on behalf of approximately 350 pension funds, endowments and other global investors, and began to increase its holdings in Aviva at the beginning of this year. The Swedish group holds 4.95% of the shares and is now Aviva’s second largest shareholder, second only to BlackRock.

Aviva promises to make substantial returns and cost reduction as its core sector Strategic shift Under Blank’s leadership, she told investors that her mantra was to act quickly.

However, Cevian hopes to receive a specific return of £5 billion in dividends or capital repurchases that exceed regulatory requirements. The radical fund also believes that cost reductions can go further, requiring Aviva’s annual cost base to be reduced by more than 500 million pounds by 2023, while management’s goal is 300 million pounds. According to people familiar with the matter, it is also pushing for a more streamlined management structure.

According to people familiar with the matter, the management of Cevian and Aviva had had constructive discussions in recent months, and he added that the fund did not seek a seat on the board of directors.

Cevian estimates that Aviva’s stock price should climb to more than £8 within three years based on the annual dividend more than doubled to 45 pence. The activist investor said that if interest rates start to rise, insurance companies may also benefit.

According to data from S&P Capital IQ, Aviva’s stock has a P/E ratio of 7 times, which is 9 times or more compared with its British competitors including Legal & General, Phoenix Group and Direct Line.

Aviva stated that it has “made significant strategic progress in the past 11 months” and remains “highly concerned” to improve its performance.

“We are in regular contact with investors and welcome any ideas that move us towards achieving long-term shareholder value goals,” it added.

Aviva is not the first British insurance company that Cevian has targeted.The fund launched a multi-year campaign against rival RSA, which completed Its sales Last week against Intact in Canada and Tryg in Denmark.

Cevian, a self-proclaimed “constructive radical,” usually holds shares for about five years and holds shares in 10 to 15 companies.

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About the Author: Agnes Zang