Shareholders’ rejection of directors’ pay plan prompted chief executive’s resignation

Aviva’s search for a new group chief executive has begun after Andrew Moss quit his post on Monday.

Moss exited this week following a row over directors’ pay in which shareholders rejected Aviva’s remuneration report at the company AGM last Thursday.

And the clamour has now started for the insurer to sell its UK general insurance arm, valued at £3.2bn by one analyst, amid hopes that Moss’s successor will split the life and general insurance businesses.

RSA tried to buy the general insurance arm in a £5bn bid in September 2010, but was knocked back by Aviva. Since then the eurozone debt crisis has struck and Aviva’s share price has tanked.

Despite RSA’s chief executive Simon Lee dismissing the idea of a large takeover, a deal to buy Aviva’s UK general insurance arm would greatly enhance shareholder value, said Jefferies analyst James Shuck.

Shuck said: “We estimate a valuation of £1.5bn for Canada and £3.2bn for UK non-life. RSA approached Aviva in 2010 only for a complicated forced break-up to fall over. The
situation is now very different. We estimate potential present value synergies of £1.5bn to RSA, equivalent to around 30% of the combined valuation of the two entities.”

Shore Capital analyst Eamonn Flanagan agreed that Aviva was now vulnerable to a “corporate predator”. He said: “This hiatus in CEO leadership could, in our view, put Aviva ‘into play’. Aviva retains a number of powerful assets which, especially given the current undervaluation, could prove hugely attractive to a corporate predator.”

Chairman-elect John McFarlane will take over at Aviva until a replacement is found. Names linked to the job include former RSA chief executive Andy Haste, Aviva’s chief financial officer Patrick Regan and UK chief executive Trevor Matthews, and Towergate chief executive Mark Hodges.

McFarlane said: “My first priorities are to regain the respect of our shareholders by eliminating the discount in our share price and to find the very best leader to be our future chief executive.”

Shuck said that Moss’s ultimate replacement was unclear, especially with Igal Mayer, former chief executive of Europe, having recently gone. “Andy Haste, previous CEO of RSA, would be a popular choice,” he added.

Current Aviva chairman Lord Colin Sharman said in a statement that Moss had approached him with the decision to step down, deeming it in the best interests of the company.

Moss joined Aviva as group finance director in May 2004 and became chief executive in July 2007.

Aviva’s share price rose 5% in early morning trading following the announcement.

Broker views

Stuart Reid

Stuart Reid, Bluefin chief executive

 

“Moss had a very difficult period in the last 12 to 24 months. I wouldn’t enjoy coming to work if I had to go through the stuff that he was going through.

“It’s interesting that they haven’t got someone immediately in place. The person that I think will get the job I’m surprised hasn’t got it already.

“Aviva were very professional about it all. I got a call this morning to check we were okay and we were, so that’s fine.”

Alex Alway

Alex Alway, Jelf chief executive

 

“I’m shocked. I thought there would be a review by the new chairman first, but it seems that [Moss] has stepped down immediately.

“It did seem like he was constantly battling with investors and brokers.

“I think [the new appointment] is going to come externally, and there are a number of people who could fill the role, but not straight away.”

Runners and riders: tipped for Aviva top job

Andy Haste
Former RSA chief executive
An obvious candidate given his proven track record, which includes turning RSA round in the space of a few years.

Mark Hodges
Towergate chief executive
The former Aviva golden boy has always wanted the top job, but will also want to see through the work he has started at Towergate.

David McMillan
Aviva UK general insurance chief executive
An Aviva man to the core, he knows the firm’s general insurance business, but the job may have come up too soon.

Trevor Matthews
Aviva UK chief executive
Not so popular among Aviva’s shareholders, given the £45,000 bonus he picked up for one month’s work when he started at the company.

David Barral
Aviva life insurance chief executive
A high-ranking choice who can’t be discounted, particularly if Aviva sells off its UK general insurance arm.

Patrick Regan
Aviva chief financial officer
Hotly tipped to fill Moss’s shoes, he has experience of working at a number of the top firms including Willis, RSA and AXA.

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