Is Aviva Plc Planning To Split Off Its UK Business?

  • May 28, 2019 BST
  • Team Kalkine
Is Aviva Plc Planning To Split Off Its UK Business?

Aviva PLC (AV) is a London, United Kingdom-based multinational composite insurer group. The group offers a wide range of savings and insurance products - including life, general and health insurance – and operates an asset management business as well. It is the UK's largest insurer and is country's only large scale, multi-line insurer, and has a strong international presence in Europe, Canada and Asia.

According to some media houses report, the group is planning for a big restructuring of its UK business next week. Some predicted that Aviva could split its operations into two parts. One would focus on life-insurance business, and another would focus on general insurance segments, like vehicle and home insurance.

Mr Maurice Tulloch, who was appointed in March this year, has commented that he wants to revitalise the Aviva, a 323-year old company headquartered in the UK. However, the group has yet to intimate the shareholders about the chief's plan, and it is supposed to brief investors on June 06, 2019.

Last week during the annual general meeting, the chief of Aviva said that “the group is still too complex” and “I want to simplify the complexity of the Aviva Group.”

The chief is also supposed to present a plan to make the insurance group more efficient. Last week during the AGM, he said that “our cost-to-income ratio is higher than it should be.”

Last week, James Shuck a City analyst, wrote in a client note that “Central costs of the Aviva have surged in the recent years and now stood at 10 per cent of the group’s operating earnings, which is relatively higher than the industry average.”

A £200 mn cut out of these costs would add 5% to the group’s earnings per share, James Shuck added.

However, the group has yet to announce the cost-cutting targets.

Share Performance – 1 Year

Daily Price Chart (as on May 28, 2019), before the market close. Source: Thomson Reuters

At the time of writing (before the market close, at 03:34 PM GMT), shares of AV were quoting at GBX 407.7 and added 3.5 points or 0.86% against the previous day closing price. During the past year, shares have registered a 52w high of GBX 525 and a 52w low of GBX 361.80, and at the current price, as quoted in the price chart, shares were trading around 12.6% above the 52w low price level. However, on a yearly basis, shares of AV have tumbled around 22.8%, but on a Year-to-date basis, the stock has delivered a price return of around 8.6%.

The outstanding market capitalisation of the insurer stood at around £16 bn, which ranks it among the large-cap stock listed at the London Stock Exchange and the group is a constituent of the FTSE 100. At the current trading level, the dividend yield of the company stood at 7.34%, which is substantially above the FTSE 100 dividend yield of 4.55%.

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