CFO Tom Stoddard is the latest to go in the top-level management shakeout that’s been happening at Aviva (LSE: AV) since Maurice Tulloch took over as CEO in March.
The previous high-profile departure was Andy Briggs, both as CEO of UK Insurance, in which capacity he was replaced by Angela Darlington as interim, and as a director of the company.
At the time of Briggs’ departure, Tulloch said: “These appointments are an important first step to bring greater energy, pace and commercial thinking to Aviva.“
The latest move, with Stoddard to be replaced in the interim by Jason Windsor, comes a day before the company’s investor update (6 June) in which Tulloch is due to set out his new strategy.
Big yields
Aviva shares have been depressed for several years now, despite a forward P/E of only around seven and with dividend yields running at the 8% level. The firm did engage in a share buyback programme to try to boost investors’ returns, but that achieved little. Word in the City is that there will be more focus on debt repayment.
As an Aviva shareholder, I’d be happy with that, as I’ve always seen returns of capital to shareholders (though buybacks or big dividends) as misguided for a company that’s shouldering a lot of debt. And although the firm spoke of debt reduction as a key focus in its last year-end update, I’d like to see it coming down more quickly.
Split?
There’s some expectation a split of the company’s life and non-life divisions will be on the cards, and there’ll be a change to the firm’s dividend policy to move away from a fixed percentage of earnings to a more flexible progressive approach.
For some time now I’ve seen Aviva shares as undervalued, and it’s not been obvious why. It will be partly due to the general malaise afflicting financial businesses in general, and I think that’s likely to extend some time after the dog’s breakfast we call Brexit is finally settled.
But the uncertainty that’s been hovering over the company since Tulloch took over, with nobody really knowing what the long-term plans were, is very likely to be keeping investors away too. And, in my view, keeping the share price very attractive.
I’m happy with the dividends I’m getting, and I’m in it for the long term and convinced good value will eventually out — and while I’m still in a net buying phase, I like share prices to stay low.
Decisions
But I fear a takeover bid might come along (and I’m aware that Warren Buffett is looking at making a big investment in the UK, and knows the insurance business probably better than anyone). But I don’t want that, because I see Aviva as something I want to keep myself for the next decade or more. And on that score, a higher short-term share price would help.
If Aviva is split in two, investors will be faced with deciding whether they want to keep their shares in the two new companies. My feeling is I’ll still want some of both.
