A Change of Strategy for Aviva?

The announcement of the appointment of Mark Wilson, the former CEO of the largest Insurance company (excluding China) in Asia, AIA, as CEO of Aviva from January 1st 2013 has been greeted positively by the industry. Mark Wilson, born in New Zealand, has spent most his career in South-East Asia both with AIA and AXA.

John McFarlane, the former CEO of ANZ Bank, will resume his role as Non-Executive Chairman. McFarlane spent most of his career with ANZ Bank and Standard Chartered Bank. At ANZ he set a strategy for the Melbourne-based bank of expanding into South-East Asia and it is today the Australian bank with the largest footprint in Asia. Standard Chartered whilst Head Officed in London has Asia as its biggest market.

Back in November 2010 Andrew Moss, the CEO of Aviva at that time, announced that Aviva was withdrawing from Asia to focus on the mature Western European markets (see http://www.itsafinancialworld.net/2010/11/aviva-to-exit-asia.html ), a move that was seen at the time very much as swimming against the tide as the likes of HSBC and Prudential were rapidly expanding there.

One has only to look at the difference in growth between the Prudential (once the target of a hostile takeover by Aviva, which the then Prudential CEO Mark Woods rapidly rejected) and the Aviva to see who had the better strategy.

The new CEO will inherit a clear strategy that John McFarlane in his time as Executive Chairman has laid out that is focused on the exiting of 16 non-performing business segments, including their US business. With challenges in their Spanish, French and Italian businesses and the increasing demand for capital from new regulation such as Solvency II, in the short term there is little opportunity for Aviva to reverse the exit and rapidly expand in Asia. There is an inherent danger that Aviva could end up following the restructuring, including the inevitable significant write down on exiting or disposing of their US business, becoming effectively a UK only insurance business at a time when the UK insurance sector is looking increasingly unattractive given the impact of RDR (the Retail Distribution Review legislation) and the slow growth in the economy.

However it is highly unlikely that an executive of Mark Wilson’s calibre would have taken the role at Aviva to run a UK only business. With Wilson’s track record of transforming AIA and the combined Asian experience that the Chairman and the Chief Executive have there is little doubt that they will both be looking East for the future growth of Aviva.

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