Aviva agrees to hand back £4bn to investors by next summer

Aviva has bowed to activist pressure and agreed to hand back ‘at least’ £4billion to investors by next summer.

In a concession to Swedish investment firm Cevian, the British insurance group said it would launch an immediate share buy-back programme worth £750million.

It has announced a half-year dividend worth 7.4p per share or about £289million and is expected to outline further proposals.

Share buy-back: In a concession to Swedish investment firm Cevian, British insurance group Aviva said it would launch an immediate share buy-back programme worth £750m

Aviva’s move follows demands from Cevian – its second-biggest investor – for larger returns to shareholders.

The hedge fund is run by Christer Gardell, who is known as ‘the Butcher’ for his ruthless and aggressive style.

Cevian has called for investor returns worth £5billion, cost cuts worth £500million by 2023 and a doubling of the annual dividend to 45p, all with the aim of lifting the insurer’s share price above 800p.

Under Amanda Blanc, who took over as chief executive last summer, Aviva is expected to hit many of these targets. 

She has vowed to focus more on its core markets of the UK, Ireland and Canada, flogging a string of the firm’s other international divisions for £7.5billion.

Aviva boss Amanda Blanc (pictured) has vowed to focus more on its core markets of the UK, Ireland and Canada, flogging a string of the firm’s other international divisions for £7.5bn

Aviva is also on track to wring out savings of £300million by next year, it confirmed yesterday.

However, Blanc’s offer to return £4billion to investors yesterday falls short of the £5billion that Cevian has demanded.

Niko Pakalen, a partner at Cevian, said it was a ‘good start’ but ‘would not be enough’ on its own. ‘We expect the company to return £5billion by the end of next year,’ he said.

However, Blanc wants to use some of Aviva’s cash to pay down debts by £1.7billion.

She said: ‘We remain completely focused on transforming performance, capitalising on the breadth of Aviva, making insurance simple and easy for our customers, and creating value for our shareholders.’

She added that discussions would now be held with Cevian and other shareholders, saying the insurer’s bosses were ‘really pleased’ with the plans set out.

‘Hopefully everybody sees that in the same way,’ she added, saying relations with Cevian bosses were ‘constructive’.

Cevian revealed it had built a 5 per cent stake in Aviva earlier this year. Gardell, the hedge fund’s managing partner, claimed the company has been ‘poorly managed’ for years, attacking high costs and ‘bad decisions’ made by bosses.

Aviva’s announcement came as the firm reported £725million in adjusted half-year profits, up from £621million in 2020. The total worth of insurance premiums sold also rose, from £4.1billion to £4.4billion.

This post first appeared on Dailymail.co.uk