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Aviva UK targets management reduction in cost-cutting drive

David Barral 480

Aviva’s UK businesses will be forced to cut costs and make job cuts as part of group-wide efforts to reduce expenses by £400m.

In a statement issued this morning, Aviva chairman John McFarlane outlined plans to slash costs as the insurer looks to appease shareholders disappointed by the company’s performance.

As part of this, Aviva has identified 16 ‘non-core’ business segments which it intends to exit. These include South Korea, UK large-scale bulk annuities and small Italian partnerships.

Speaking to Money Marketing, Aviva UK Life chief executive David Barral (pictured) says the provider will strip up to four layers of management from certain parts of the business in an effort to improve efficiency and reduce costs.

He says: “There will be a net role reduction in the UK but we are not giving that figure at the moment.

“We are looking to strip out unnecessary layers of management. We have had up to 11 layers of management between chief executive and front line staff and we are trying to reduce that to a maximum of seven.

“The margins are only going one way in this market place and that is down, so any business is going to have to drive for increased efficiency and better productivity and we are no different.”

Barral declines to specify how much of the £400m cost reduction will eventually fall on Aviva’s UK operation.

He says: “We have a target for reducing costs but that is not a figure I am going to give. The cost base for the UK life business in 2006 was about £1.2bn and in the full year results last year we exited at £737m, so we have a track record of driving down costs and improving profits.

“The group has not had a cohesive strategy but the life business in the UK has had a cohesive strategy. We already have a highly performing business but at the same time we are not immune.”

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