Aviva USA: What would the sale say about the annuities industry?Blog added by Paul Wilson on April 17, 2012
Paul Wilson

Paul Wilson

Denver, CO

Joined: May 30, 2007

My Company

When you follow the financial services newswires as closely as we do, your eyes can occasionally glaze over in the face of the steady stream of studies, surveys, mergers and acquisitions and press releases.

But whenever word comes down that a carrier is making a major move like Hartford exiting the life business or Prudential ending sales of individual long term care insurance, it tends to get your attention.

Last week, the Financial Times reported that Aviva is considering selling its U.S. unit, Aviva USA, an important player in the annuities industry.

As reported by our sister site, LifeHealthPro, Chris Littlefield, president and CEO of Aviva USA immediately sent out a memo to company agents addressing the report. Written in typical corporate speak, it probably didn’t do a whole lot to reassure nervous employees or slow down the industry rumor mill.

Indeed, speculation about potential buyers is already running rampant, with the long list including such names as Pacific Life, Genworth, Western National, American National, MetLife, Prudential and even Japanese insurers Tokio Marine and Meiji Yasuda Life Insurance.

While most analysts seem to think the sale would make sense from a business perspective, what would the move mean to the annuities industry?

Clearly, some would perceive the sale of a major influencer in the annuity community as a negative reflection on the health of the industry. However, Stephen Forman’s latest article, which examines the impact of Prudential’s recent exit from the LTCI industry, argues that “every industry exhibits shakeouts of weaker competitors.” He goes on to reference the rule of three and four: “Common sense says, if you cannot be a leader in a product market sector, cash out as soon as practical. Take your writeoff. Take your tax loss. Take your cash value. Re-invest in products and markets where you can be a successful leader."

What’s your reaction when carriers leave a market? Do reports like this leave you with a sinking feeling or does it all just come down to survival of the fittest? Which is better for the industry: market consolidation or a larger, more competitive field?
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