The Aviva sale: get all the facts and consider the source Article added by Jason Kestler on February 13, 2013
Ranked: #29 (1,269 pts)
I’d like to believe that the owners of independent marketing organizations (IMOs) are hard-working, ethical entrepreneurs. In fact, I consider many of them close personal friends. However, some of their internal marketers, often at the encouragement of insurance company wholesalers, tend to stray across ethical lines. The most recent evidence of this is the mud-slinging regarding the recent announcement that Aviva, PLC would be selling their U.S. operation, Aviva USA, to Athene Holding, Ltd.
We have heard numerous comments from producers:
“So and so with IMO X told me that Aviva had financial problems and was forced to sell to Athene.”
“I’ve read that Athene’s ratings are very low and Aviva USA (soon to be Athene USA) will follow suit.”
“I want to terminate my Aviva contract because I’m uncomfortable with the changes at Aviva.” (Translated as, “This gives me a reason to go roll my book of business to another company and generate new commissions at the expense of my clients.”
I have given two pieces of advice to anyone who has expressed any concern:
1. Get all the facts.
Fact: Change is inherent in our industry. It’s not necessarily good or bad — it just is.
2. Consider the source.
Fact: The fact that Aviva USA was a candidate for sale has been around for over a year. Why would Aviva, the oldest continuously operating insurance company in the world, decide to sell off their U.S. operations? Solvency II. This regulation put forth by the European Union (EU) essentially increases the reserving requirements for all EU insurance companies. The result is that
if the company has to put more of every premium dollar into reserves, there is
less to work with for things like performance, liquidity, commissions and, most
of all, profit. In a 6 percent bond market, this is just another cost of doing business.
With the 10-year treasury hovering below 2 percent, it forces any European parent to question whether it makes sense to operate in the U.S. This is not only an Aviva issue. Other major players with European parents
also face the same dilemma. Allianz Life of North America for example,
owned by Munich based Allianz, AG, has to deal with the same set of reserving
requirements. If we oversimplify, Allianz, AG has two options:
1. Continue to invest capital reserves in its U.S. subsidiary, or
Fact: When the deal is closed later this year, Athene will become the number two distributor of annuity products in the U.S.
Other recent acquisitions have been Liberty Life (RBC Annuity) and Presidential Life of New York. Athene
Holding Ltd. (Athene Holding) is a life insurance holding company focused
principally on the retirement market and whose business, through its
subsidiaries, is focused primarily on issuing or re-insuring fixed and equity
indexed annuities. Currently, Athene Holding’s principal subsidiaries are
Athene Annuity & Life Assurance Company, a Delaware domiciled insurance
company, Athene Life Insurance Company, an Indiana domiciled insurance company,
Investors Insurance Corp, a Delaware domiciled insurance company, and Athene
Life Re Ltd., a Bermuda reinsurer.
2. Reduce benefits, commission, profitability, etc. on a going-forward basis.
Athene Holding was formed in 2008 by James R. Belardi, former President of SunAmerica
Life Insurance Company and Executive Vice President and Chief Investment
Officer of AIG Retirement Services, Inc. along with Chip Gillis, former head of Bear
Stearns’ Insurance Solutions Group, and sponsored by an affiliate of Apollo
Global Management LLC) to provide solutions to the growing need for tax-efficient savings vehicles to support retiring baby boomers. The products
offered by Athene Holding, through its subsidiaries, include:
Assets of Athene Holdings subsidiaries are managed by Athene Asset Management LLC.
- Retail fixed and equity indexed annuity products
- Institutional products, such as funding agreements
- Co-insurance and reinsurance arrangements with third party life insurance and annuity providers
Fact: Ratings, following the announcement:
Poor ratings? I don’t think so. These are predictable adjustments.
- S&P affirmed Aviva USA’s Financial Strength Rating of “A-”
- AM Best lowered Aviva’s Financial Strength Rating from “A” (Excellent) to “A-” (Excellent)
- Moody’s lowered Aviva’s Insurance Financial Strength rating one notch from “Baa1” to “Baa2”
Consider the source
When we all took our insurance test, we had to learn the definition of “twisting:"
“The act of inducing or attempt to induce a
policy owner to drop an existing life insurance policy and to take another
policy that is substantially the same kind by using misrepresentations or
incomplete comparisons of the advantages and disadvantages of the two policies.
Most states have enacted legislation making twisting a crime.”
Although twisting is a crime if you use it on your clients, some wholesalers have no problem using it on you to try and get your business. Remember, the vast majority of IMO marketers are commission based. They make no money until they get you to sell something for them. Keep in mind, if you use twisting tactics to sell a product to a consumer, the consumer and the regulators can come after
you as recourse. How much recourse do you have on an unethical marketer? I
thought so. Your best defense is to get all the facts and consider the source.
If a marketer can earn your business with superior service, marketing support or a unique product, more power to them. If
they have to resort to twisting by selling half-truths and rumors, don’t just walk away — run!
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