By Iain Withers
LONDON (Reuters) -Aviva is opposing a UK proposal to force pension funds to back more British start-ups in a bid to keep London competitive with rival finance hubs like New York, the CEO of the FTSE 100 firm told Reuters on Wednesday.
British officials are drawing up a blueprint for a proposed 50 billion pound ($63 billion) ‘Future Growth Fund’ for local start-ups, which could be supported by a government mandate for pension funds to invest a proportion of their funds.
“We’re big supporters of investing in the UK… However, we are not supportive of a mandated participation,” CEO Amanda Blanc said. “We do not feel that creating a complex and bureaucratic fund… is the right way forward at all.”
Blanc’s comments come after the insurer and asset manager reported mixed first quarter trading – sending shares down 5%.
But its improved recent performance has been enough to win over activist investor Cevian Capital, which had built up a stake to campaign for higher investor payouts. A Cevian spokesperson said the firm had entirely exited its position.
Blanc’s remarks on the Future Growth Fund will likely be seen as setback for the project, which is designed to help stem the flow of technology firms snubbing London for New York.
Veteran banker and current lord mayor of London Nicholas Lyons told Reuters this month he was in advanced talks with FTSE 100 asset managers on setting up the fund, but said he did not view a government mandate as a deal-breaker.
The British government is expected to lay out plans to boost pension investment in the coming months. The opposition Labour party is prepared to compel pension funds to invest in the fund if it takes power, the Financial Times reported this week.
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Aviva has undergone a shake-up under Blanc to hike investor payouts but is contending with claims inflation and choppy market conditions like many rivals.
The company reported growth in key business lines in the first quarter including an 11% jump in general insurance premiums to 2.4 billion pounds, but a slowdown in net flows to its wealth business after a volatile period for markets.
Analysts at JPMorgan said the figures were “mixed”, and that the company’s capital ratios – including a solvency ratio of 196% – came in slightly lighter than expected.
Aviva shares were down 4.9% at 1044 GMT, against a 1.8% drop in the wider FTSE 100 index.
The company also said it was on track to meet its target of cutting 750 million pounds of costs by 2024. “Costs have ticked lower which is no easy feat in today’s inflationary environment,” said Matt Britzman, analyst at Hargreaves Lansdown.
A 25% jump in private healthcare sales in the quarter reflected concerns about the capacity of Britain’s National Health Service, which provides free and discounted health and dental care.
“That’s as a consequence of what we’re seeing in the NHS and customers basically saying that if they can take control over their health situation then they will,” Blanc said.
($1 = 0.7923 pounds)
(Reporting by Iain Withers, editing by Sinead Cruise, Elaine Hardcastle, Alexandra Hudson)
