Aviva has been a liability to investors but new boss promises turnaround The actual results were surprisingly bad, too. Aviva announced a pre-tax loss of £3.05bn, "principally arising" from the sale of its American arm, which incurred a £3bn loss. But operating profits dropped 15pc to £2.127m where analysts had expected £2.162m; general insurance fell 4pc to £893m, where the consensus had been £942m. The poor performance was underscored by stellar results from rivals. Standard Life reported a 65pc jump in pre-tax profits while Aviva's rival UK life business grew just 2pc. Even the new boss Mr Wilson admitted: "It is clear to me that Aviva has not articulated why investors should buy or hold Aviva shares." The chief executive, who has been in the job just three months, said he didn't think it was "helpful" to blame the former regime. However, he added that in recent years Aviva's "strategy was wrong" He said that decision to enter a mature market like America was a mistake. "If I were a shareholder, I would be frustrated and angry," he said. In a powerful first response, Mr Wilson has banned bonuses and pay rises for the executive team. He has also started work on investors. "There has been an emotional response," he said. But I think, intellectually, many of them get it now. They understand that our cash flow is too tight, our debt levels are too high, and the scrip was damaging the business by diluting shareholders. We now have a clear story: our focus is going to be on cash flows. The business will be simple, transparent and far more efficient. Aviva is a big ship to manoeuvre: it has 45,000 employees serving 43m customers in 28 countries spread across the world. Before Mr Wilson joined, Mr McFarlane had started work with his "turnaround plan," unveiled in the wake of Mr Moss's departure. His first mission was to boost Aviva's capital levels. The company's surplus capital was just £3.6bn or 130pc over the amount needed to cover liabilities. Mr McFarlane wanted to have as much as 180pc coverage and the fastest way to build it up was to sell divisions - a method that also served to lop off inefficient limbs. Some 16 business units were earmarked for disposal, the biggest of which was America. The sale of the division, at half its book value, blew a £3bn hole in the results, but Aviva said it was worth it - the return on equity was just 3pc compared with a 10pc group average. The businesses in Russia, Sri Lanka, Malaysia and a Spanish joint venture have also been ditched, and another 27 units have been targeted for turnaround. Yesterday, Aviva claimed victory on this first challenge - capital surplus doubled last year to £7.1bn. However, the disposals have exacerbated Aviva's debt problem. The company's net asset value has plunged from 435p a share to 278p. Tangible debt has consequently risen from 41pc to 50pc of assets. The company has promised to bring the ratio back down to 40pc. But, with 90pc of the disposals by value now completed, this requires finding and retaining a lot more cash. The dividend cut is only part of that plan; Aviva needs to extract more cash from its subsidiaries. Mr Wilson said cash flows will be improved by driving efficiencies, focusing on value-based products, and streamlining the company's structure. He admits that the task is big and there may be more disappointments for shareholders on the way. But, after the pain, Aviva will have the key advantage of diversity over the monoline insurers. "This is a journey," he said. It's not just about pulling one lever. Aviva has many strengths to build on. My intention is that Aviva will be a simpler business with a robust balance sheet that delivers sustainable cash flows and growth. He just needs to hope that shareholders are willing to keep writing the risk.