LONDON British insurer Aviva Plc (AV.L) is to cut 2,000 jobs and slash redundancy payouts in the process, setting up a showdown with the country's biggest trade union as it attempts to cut costs and mollify shareholders after a recent investor revolt.
Chief Executive Mark Wilson said the cuts would equate to around 6 percent of the global workforce over the next six months and reflected the group's commitment to deliver more than 400 million pounds ($609 million) in cost savings by year-end.
Aviva, which employs around 31,200 people, said it would also overhaul its redundancy policy for all employees on UK contracts. From May, pay will be capped at 78 weeks of service and from December, staff will only receive two weeks' pay for each year of service, rather than a current four weeks' pay.
"I know this is difficult news for our employees but these changes are essential," Wilson said in a statement. "Aviva needs to become a more efficient and agile organization."
Aviva launched an overhaul of its business last year after spiraling costs and poor share price performance triggered an investor revolt that forced out former CEO Andrew Moss. Chairman John McFarlane subsequently drew up a review promising savings from the sale or closure of more than a dozen underperforming units across its insurance and asset management operations.
Britain's largest trade union Unite branded the group's planned reforms in its redundancy terms "a callous and disgraceful act" on Thursday.
"...the UK workforce, which is the backbone of the company, has suffered job cuts, pay freezes and now faces an attack on their redundancy terms, when the company is planning more cuts," National Officer Dominic Hook said. "Unite will give staff all the support possible to oppose any job losses in the UK and the cuts to redundancy terms."
Aviva cut 2,500 jobs globally last year and has made annualized cost savings of 275 million pounds through its efforts so far.
It gave no details on Thursday where the axe would fall but said it was consulting with relevant staff representatives and would provide further information on the roles affected as soon as the detail was available.
"(It's) sad news for those affected but Aviva needs to become more competitive," Panmure Gordon analyst Barrie Cornes told Reuters. "We would anticipate that a significant number of the 2,000 job losses will be lost from the UK, given its significant market share here in both life and non-life."
Wilson, who took the helm in January, slashed the 2012 dividend by more than a quarter in March to repay debt, as the company reported a 15 percent drop in operating profit to 2.13 billion pounds, broadly in line with forecasts.
Aviva shares were flat at 294.4 pence by 1342 GMT, broadly in line with London's top blue chip companies.
(Reporting by Anjuli Davies and Sinead Cruise; Editing by Sophie Walker)