Inside the murky house of Aviva

Aviva PLC, who describe their strategy as:

‘….Strategy

Our purpose is to bring prosperity and peace of mind to our customers.

We will do this by realising our vision: One Aviva, twice the value.

By working together across our businesses, we will optimise our performance in the global marketplace and maximise the value we can generate for all our stakeholders….’

Have a strange way of reflecting this ‘peace of mind’.

While many people around the world decry the bonus culture and perceived greed of the City Bonus culture. Aviva, seem to feel they are all too far above this, for it to matter.

Andrew Moss CEO Aviva

Andrew Moss CEO Aviva

Andrew Moss Chief Executive Officer of Aviva saw the business plunge in to the red last year:

Moss has led this company whilst, Aviva shares have fallen by 60% in the past year, profits for 2008 and has managed to run the business at a loss. The business has dropped from pre-tax profits of £1.8 billion to losses of £2.4 billion. Anyone of a reasonable nature would see this as a catastrophic failure. £2.4 billion loss. However not dear old Andrew Moss and the Board of Aviva, who actually see this as a good thing and feel that the man deserves not only a pay rise, but also a bonus.

To his credit he is talking of foregoing his pay rise, however the bonus for last year was: £752,000, one-third in cash and two-thirds in shares. He also got £463,000 in Aviva’s long-term savings scheme.

He portrays this failure as some sort of marvellous stamp of approval on his track record and gleefully announces dividends will not be cut

In a tumultuous year, our underlying business has shown great resilience … Operating profits are up and we have maintained our dividend. Bottom line earnings have been affected by investment markets, which have predictably created significant unrealized losses during the year.

He should be sacked not rewarded.

While I take a look at Aviva, it would be interesting to get a perspective on this urgently needed operating business name change from Norwich Union, to Aviva. The exact costs of this rebrand are not yet fully disclosed, but are known to run in to hundreds of millions of pounds.

Supposedly this is all about cost efficiency and more importantly to quote the strategic aim of the business ‘we will optimise our performance in the global marketplace and maximise the value we can generate for all our stakeholders’

Andrew Moss in 2008 had this to say of the rebranding: ‘…did not expect the name change to hit sales….’

Well excuse me for being a bit thick here. Not expecting the name change to hit sales is hardly a compelling business rationale to spend hundreds of millions of pounds. He didn’t say, this will increase sales, or even this will ensure maintaining market share, no he said quite clearly he didn’t expect the name change to hit sales.

So how is the rebranding being paid for?

According to the FAQ page on the Aviva website about the name change:

Q. Will my premium go up to pay for this?

No

Q. How much will this cost?

The cost of rebranding will be more than outweighed by the cost-efficiencies achieved by supporting one brand rather than several.

A bland response, but one to work with, but it does somewhat counter a comment Moss made in 2008 when he announced the rebranding programme: Although he declined to comment on the cost of the rebrand he did say the group was ready to make a ‘significant investment’, an interesting juxtaposition.

Moss acknowledges this rebrand will require a ‘significant investment’ and hedges on the question of future sales by saying it shouldn’t have a negative impact. So why did Aviva go for the name change?

Amanda MacKenzie Group Marketing Director Aviva

Amanda MacKenzie Group Marketing Director Aviva

Step forward Amanda Mackenzie Aviva Group Marketing Director, who joined the group in 2008. Was the rebrand created to entice her from Centrica?

Mackenzie is well known for her rebrands of corporates and she specializes in expensive changes. She worked at BT when it changed its logo from a piper to a globe and helped Mars when it changed Marathon to Snickers and Opal Fruits to Starburst.

Amazingly enough, even she doesn’t really believe in this rebrand stating:

‘…We have got to be open-minded enough to say: Well, maybe we will keep a little bit of the comfort blanket of the old brand for a little bit longer, if people need it…’

We have the bizarre situation that the CEO is not sure if sales will drop, but knows this is going to cost a great deal of money and a Marketing Director who really doesn’t think it is a great idea, as she acknowledges the old brand names need to be kept round a little longer.

Then to compound it further, the ‘global name’ is not really a good idea after all, as the Aviva FAQ reminds readers:

Q. Are there any businesses in the Aviva group which will not move to the global brand?

  • RAC
  • Delta Lloyd
  • Navigator

You can sort of run with the excuse that the RAC is vehicle breakdown and not insurance related, sort of.

You can’t run with Delta Lloyd who are clearly involved in the insurance business, based in Holland.

Navigator is again clearly an insurance business. If you take a look at their Australian website, it appears that Navigator Australia haven’t been told they are not part of the rebranding programme, the Singapore website looks as confused.

What has been the outcome of the rebrand so far?

Have staff fared well? 1,100 job cuts in the UK announced so far have not been well received. The job cuts may well be unrelated to the rebrand, but do focus the mind on how much the rebrand is costing.

Have policy holders fared well? The NULAP pension investors found there was no annual bonus on their with profits investments.

Have shareholders fared well? Despite massive losses, the dividend has been held.

Have directors fared well? Moss received a handsome bonus.

There has been no sound business case made for this rebrand, with the Championing Directors having public doubts.

Yet, despite all this, the Directors of Aviva, feel they have done sufficiently well in managing a loss of £2.4 billion, to award themselves bonuses.

Aviva PLC and Andrew Moss in particular is a fine example of moral turpitude in the UK. This man should resign as he has turned a profitable business into a loss maker. He wants the credit if it goes well; he needs to accept responsibility now that he has been seen to fail to catastrophically.

What level of loss does the Aviva Board deem unacceptable? An RBS scale failure?

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