News & Analysis

AVIVA CEO Amanda Blanc fights back against the activists

Andrew Saks, Monday, 14 June 2021

Hell hath no fury like a woman scorned. Especially if her CEO position is on the line.

Good on AVIVA's CEO Amanda Blanc for fighting back!

Ms Blanc became the second female FTSE 100 CEO who has come under fire from activist investors trying to shuffle the boardroom from the outside in just one month, however she is not taking it and quite right too.

AVIVA is one of Britain's largest insurance companies which was founded as a result of the amalgamation of old school giants Commercial Union, Norwich Union and General Accident many years ago is a publicly listed leviathan, and one of the most consistent FTSE 100 stocks in terms of performance.

Cevian Capital, an axe-swinging Swedish hedge fund which has a history of taking large stakes in blue-chip companies and attacking their senior management at board level, invested in AVIVA, taking a 5% stake last week at which point Cevian Capital focused its attention on attempting to remove CEO Amanda Blanc from her position by setting some unrealistic new targets after realizing that she is likely to achieve her existing targets.

Now, however, AVIVA's board has taken a firm stand and announced that it aims to fire its top fund managers as part of its longer term cost-cutting plan, giving Ms Blanc and her executive team an edge by aligning with Cevian Capital's remit.

Cevian Capital, following the acquisition of its controlling stake, has been pushing AVIVA to reduce £500 million in operational costs by 2023.

By deciding to cut top fund managers, AVIVA has sent a message that a cost-cutting initiative by a fund manager with an interest in making swift changes to the business would also potentially affect AVIVA's core performance as fund management of life assurance policies is how they make money.

Those who remember FX Concepts in the United States and its almost instant collapse in 2013 will certainly recall that the strongest fund managers that manage insurance and pension policy funds are gone tomorrow without the right fund managers.

In the case of FX Concepts, which had been the world's largest FX hedge fund since its establishment in 1982, the best of its fund managers had left the company and their replacements not up to the same standard which meant the risk-averse pension funds and insurance companies whose money FX Concepts traded pulled their funds out, leading to the collapse of FX Concepts and all open positions being wound back in an emergency-style manner before turning off the lights.

AVIVA's clever move shows that it can play Cevian Capital at its own game by going along with the draconian attempt to reduce the cost base, but doing so with key revenue driving areas of the business.

 Cevian Capital appears now to be on side with Ms Blanc as the company shows that it is serious by firing David Cumming, Chief Investment Officer for Equities and Mikhail Zverev, Head of Global Equities.

Perhaps Cevian, itself a hedge fund, wants to place its own fund managers in these positions hence its interest in AVIVA in the first place.

An analyst in London on Friday stated that he thinks the move dramatically scales back AVIVA's stock-picking team just as the fund management industry comes under pressure from cheap 'robot' funds that follow the stock market.

That is possible, but likely a coincidence. More likely, Cevian Capital wants to increase its remit by getting rid of existing fund managers and installing its own, something Ms Blanc likely realizes.

AVIVA stock has held its position, and remains at its second highest position in a month.

Either way, she certainly isn't firing Blancs.

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