Aviva , Britain's No.2 insurer, plans to sell or close more than a quarter of its businesses in a shake-up aimed at regaining the support of investors irked by the group's flagging share price.

The company, whose weak stock market performance led to the removal of chief executive Andrew Moss in May, will axe 16 lame- duck businesses that account for 18 percent of operating profit, it said on Thursday.

"They've at last got to the nub of the matter which is that they've got lots of business units that are not making a proper return on risk capital," said Investec analyst Kevin Ryan.

"But clearly there's enormous execution risk in that this is not an environment in which to try and sell."

The assets earmarked for sale or closure include Aviva's South Korean arm, its bulk purchase annuity unit, and its stake in Dutch rival Delta Lloyd. The insurer declined to name the others, as doing so might hinder efforts to sell them.

Analysts said Aviva's sizeable U.S. arm, acquired for 2 billion pounds in 2006, was probably also on the block.

The disposals are designed to bolster Aviva's capital reserves to counter worries that the insurer's focus on mainland Europe has made it vulnerable to losses on its holdings of distressed euro zone sovereign debt.

Aviva's regulatory capital buffer fell by a third between July and September last year as the escalating crisis in the euro area triggered sharp falls in the value of bonds issued by heavily indebted governments.

The insurer said it sold 2 billion euros ($2.5 billion) of Italian sovereign debt in June, reducing its holding to 5 billion euros, and also flagged up 400 million pounds of cost cuts to be achieved in part by a cull of middle management.

BUYERS SCARCE

Aviva shares were little changed at 1402 GMT, outperforming a 1.8 percent drop in the Stoxx 600 European insurance index <.SXIP>. The stock has still lost about third of its value in the past year against a 10 percent decline for the sector as a whole.

"It's a bold effort, but there aren't too many buyers lined up on the other side," said one top 40 institutional shareholder.

"I think they've got a long way to go."

Most insurers in Europe and the U.S. have put acquisitions on hold as low interest rates, faltering economic growth and tougher capital requirements crimp their finances.

Aviva Chairman John McFarlane, in day-to-day control since Moss quit, said there would be no need to raise equity or cut the dividend provided economic conditions did not deteriorate, adding that the insurer would prefer to sell assets if they did.

"At the end of the plan, Aviva will be focused, financially strong and performing," he told reporters on a conference call.

"I believe I can make a difference here."

A further 27 of Aviva's 58 units, including its general insurance business in Ireland, "require significant improvement," Aviva said.

The overhaul should feed through into Aviva's financial results by 2014, and will be led by David McMillan, formerly head of Aviva's general insurance operations in Britain and Ireland, McFarlane said.

Aviva has hired headhunters Spencer Stuart to help it find a new chief executive, and an appointment is expected in early 2013, he added.

($1 = 0.6419 British pounds)

($1 = 0.7994 euros)

(Reporting by Myles Neligan; Additional reporting by Chris Vellacott; Editing by Erica Billingham)