Aviva must return capital says activist investor Cevian

Cevian Capital has acquired a 4.95% stake in Aviva

Cevian Capital, an activist investor, confirmed on Tuesday it had acquired a 4.95% stake in Aviva (LON:AV), and that the UK insurer should now be able to return £5bn of excess capital next year.

As an alternative to ousting chief executive Amanda Blanc, Cevian is encouraging the FTSE 100 company’s boss to work on a number of disposals she announced when she took over the company nearly 12 months ago.

Over the past year, Aviva has agreed to sell eight non-core businesses, raising nearly £8bn, in an effort to prioritise the UK, Ireland and Canada. The pursuits of previous leadership teams were seen by some analysts as overly ambitious, leaving Aviva with an overly big cost base.

“Aviva has been poorly managed for many years, and its high-quality core businesses have been held back by high costs and a series of bad strategic decisions,” Christer Gardell, managing partner and co-founder of Cevian said in a statement.

The insurer “has the potential to become a focused and well-capitalised market leader that produces profitable growth, generates significant cash, and is highly appreciated in the equity markets,” he added.

At the end of last month, Aviva said it had raised £7.5bn from disposals, while its intention was to return the money to shareholders. However, Aviva did not put a number on the amount.

Analysts, according to Reuters, expect the insurer to have between £3.7bn and £6.6bn in excess capital after the asset sales were completed.

“Aviva has made significant strategic progress over the past eleven months and we remain sharply focused on further improving our performance,” an Aviva spokesperson said in an emailed statement.

“We regularly engage with investors and welcome any thoughts which move us towards our goal of delivering long term shareholder value”.

Cevian manages in excess of $16bn on behalf of 350 pension funds, endowments and other investors. According to the Financial Times, it began building it stake in Aviva early this year. With its holding at 4.95%, Cevian is now Aviva’s second-largest holding behind BlackRock.

The Aviva share price is up by 2.53% during the morning session to 421.10p per share.