Aviva Cuts Next Tier of FMOs

[patch36]

I believe they are simply being prudent and proactive.

Perhaps some of the IMO/FMO groups that were cut were not as large as they had led their agents to believe? I know of many larger Marketing Orgs that are still selling AVIVA. I have contracts with 3 different FMO's that are still contracted with AVIVA. BTW, I quit selling their products about 2 years ago and don't miss them, but the folks I know in Topeka are for the most part really good and decent. AVIVA/Amerus were the problem, not American Investors, IMO.

 

[briko3]

OK, this should clear things up on why they are paring back annuity sales. When a company gets annuity money, they are required to use part of their reserves (actually more than a dollar for every dollar received). Companies in times like these want to make sure their reserves stay high so that they keep their top ratings. For that reason, if they cut back annuity sales, the reserves stay high. Makes sense to me.

 

[nka245]

OK, this should clear things up on why they are paring back annuity sales. When a company gets annuity money, they are required to use part of their reserves (actually more than a dollar for every dollar received). Companies in times like these want to make sure their reserves stay high so that they keep their top ratings. For that reason, if they cut back annuity sales, the reserves stay high. Makes sense to me.

It is like any business, really that works off of a budget.
You have a hot dog cart. You budget to sell 100 hot dogs a day for 3 months but by month 2, everyone and their brother wants to eat your hot dogs for lunch but you didn't budget for 500 hot dogs a day and don't have the hot dogs, buns, propane, condiments, nor man power to handle it so what do you do when you run out of hot dogs? You pack up the cart and go home...

 

[Tomfromtheshade]

When an insurance company screws you, and you think what they are doing is illegal, you drop the dime on them. Contact the Dept of Insurance and let them know what happened and have them sort it out. No one wants those guys up their ass with a microscope.

 

[policy doctor]

Well looks like someone beat me to the punch and posted "THE FAT LADY SINGS" letter.

I've been in insurance long enough to :

l. Believe the rumor, unload the contract.

2. Spread your business with many carriers and different products.

3. Forget supposition....you know nothing. You are a HIRELING.

 

[PaulC]

Tomfromtheshade: I already have been working with the Insurance Commissioner. The owner of the agency in California pulls up in "BOLD RED LETTERS" when you search him on the Washington OIC website a warning to "Contact the OIC on this person". He doesn't have a Company Affiliation on file or finger print card. His agent under him who has been doing the solicitations is not licensed here at all.

I have also done some other research and it also turns out the Owner has settled "Out of Court" on several Senior Predatory type cases he had against him. Since he has not been convicted I guess his license has not been pulled.

You got to love it. These are the quality of guys Aviva/American Investors finds to replace their discarded agents with. They are basically attempting to steal my clients. Don't be surprised if you get the same thing happening to you. I know for a fact that a lot of agents are pissed and are taking their clients out. AVIVA changed all their conservation procedures last month and they have got very aggressive in their conservation department. AVIVA is pulling out the "Tony Sopranos" to stop it.

BTW, this is another point people need to be aware of. There has been a large increase of 1035 exchanges OUT of AVIVA/American Investors and this is also impacting their cash capital reserves. It was really stupid to get rid of as many agents as they did. What do you think agents are going to do with their clients when you cut them off?

I have seen this before with companies prior to going into receivership and it almost always has the same scenario. (Not saying receivership is what is going to happen.)

"We are fine we are just being prudent". Meanwhile behind the scenes they are running around trying to cut things everywhere.

Next they cut products out or stop selling. (While nobody else in the industry seems to be doing this on this kind of scale.)

Then the conservation department kicks in and they start assigning new agents to clients to try to keep business on the books because they can't afford to pay all of it out as they start to leave.

Anyway it becomes a self fulfilling prophecy. Parent says no more money we are having money problems. The market is also fighting against them. They fire agents. They stop annuity production and stress Life Insurance (Since Life does not require the kinds of matching capital.) Then their rating starts to tank. Then the Sopranos come out.

Anyway I am not a mind reader as someone also said earlier. When I smell smoke I assume there is a fire. I have got stuck in a company once before that went into receivership and it stinks. They lied to me all the way through it. Saying they were fine, and then started doing exactly what AVIVA/American Investors is doing. Their excuse for lies after the fact was they were a publicly traded company and any info they gave me prior to a formal announcement was a SEC violation. At the time they also probably believed their own press releases. However, now when I smell the stink I do what is best for my clients and move them someplace else.

Again guys it is not the size of the lines that they are getting rid of as much as the cost of keeping those lines. If things were really not that bad as they say and if they wanted to eliminate production they could suspend products or put caps in place. This goes way beyond that. They are eliminating those lines that have trailing commissions, asset under management contracts and pension/C.A.R.E Plans.

Since I can't post my links yet, do a search of Guardian.CO.UK and look at all the recent crises AVIVA caused in the last 2 weeks in Europe. AVIVA's stock tanked when they reported a £1.3bn loss last year and because of a report by Citigroup that AVIVA is undercapitalized and the most at risk in Europe.

BTW, this loss conflicts with the "rosy" picture Mark Heitz paints in his state of AVIVA letters he has recently sent out. Has anyone noticed he keeps talking about the financial strength of AVIVA Britain but when he talks about the financial strength of AVIVA USA he doesn't quote any numbers? Also the numbers he quoted about AVIVA Britain (In British Pounds and not US $, to make it look like it was less.) are totally opposite from what AVIVA officially posted last week. All he talks about as far as AVIVA USA is last year's production as proof of how well they are doing. He spins the fact that making #1 was a goal and proof of their strength and that they did it a year ahead of plan. Then they act like it was the plan all along to be #1 was a one-time thing and to cap it once they reached that goal. BS!


The first cut of agents was about 9 thousand at the first of the year when AVIVA told them no more money for YOU because they didn't have any to spare. This came after AVIVA had put a stop to investors withdrawing their money out of a Third Property fund. They had to put a stop to it because they didn't want to sell the assets and take an unrealized loss and there wasn't enough working capital to cover the costs without selling those assets. Then after the bad reports on AVIVA by Citigroup then AVIVA posting a £1.3bn loss last year causing the stock to tank, the next week they canned another 15 thousand agents. Yeah right that was just coincidence. If the numbers I have been told are correct they have canned a total of about 24,000 agents since the first of the year. At least those are the numbers if you add up NBC Group, Financial Markets Inc and all the others. They have stripped a lot of agents out of the loop and off their books.

And yes, Annuity business is expensive and it requires a lot of working capital in order to sell it. That was their problem. When the economy tanks they try to blame the state o the economy instead of the fact they were ambitious and failed to properly handle that much business in case something happened. They not only have to keep the $ for $ reserve in place but they have to keep a cushion for regulatory requiremnts. In order to do this, every time an Annuity is sold they have to back it with some of their own cash and to cover the commissions and make sure they can cover the minimum interest rate guarantees. This is why they are generally long term investments for Insurance companies and they generally only make a couple of points off them in the long run. But it is stable money and doesn't carry a lot of risk to the companies.

When they stop selling it, it means they DON'T have the capital! What is even worse their mother's tit has gone dry as well and if they need to come up with additional money to meet regulatory reserves, they can't go crying to mama to get it.


Sorry for the long post.

 

[PaulC]

Here are some recent headlines. If you go on to the Guardian.co.uk site and search on AVIVA, they have been taking some some substantial hits for nearly a year.

Insurance shares dragged down by Aviva losses


Phllip Inman and Andrew Clark
Guardian.co.uk, Thursday 5 March 2009 22.28 GMT


Heavy losses at insurer Aviva today prompted a wave of selling across the insurance sector that dragged the FTSE 100 down more than 3%, driving shares close to a new six-year low.

Investors took fright after the owner of Norwich Union recorded a loss before tax of £1.3bn last year fuelling fears that the insurance industry was poised to become the next victim of the financial crisis....

Aviva struggles again as FTSE 100 tries to move ahead

Guardian.co.uk
Posted by Nick Fletcher
Friday 6 March 2009

Insurers are again under the cosh, even though leading shares are in general trying to push higher after yesterday's traumatic day.

Aviva - which spooked the sector with a £1.3bn loss before tax - is down another 7.2p at 182.7p. The company, currently spending millions reminding us its Norwich Union business is taking the Aviva name, sparked concerns about the capital position of the major insurers...


Aviva feels full force as storm batters insurers

Jill Treanor and Graeme Weardon
The Guardian, Saturday 7 March 2009


Insurance companies took another pummelling on the stockmarket yesterday amid deepening concern about the sector's health, sparked by losses at Aviva

Trading in the shares of Aviva, which owns Norwich Union, was briefly suspended as the insurer was hit by a second day of selling. On Thursday, Aviva lost a third of its value after admitting it had slumped to a loss and by insisting it would pay a dividend when the City felt it should be preserving capital.

No Aviva shares changed hands for five minutes, starting at 8.24am...


Insurer Aviva slides on balance sheet worries

Guardian.co.uk
Posted by Nick Fletcher
Friday 12 March 2009

Insurer Aviva continues to slide on growing concerns it may need a fundraising. The company recently held its 2008 dividend, which rather than reassuring investors, set them worrying about the company's capital position.
Citigroup analyst Andrew Crean has done much of the damage, downgrading his recommendation from hold to sell and slashing his price target from 450p to 160p. In the market Aviva is now down 28p at 185.5p - a 13% decline...

Crean Said:

"Re-capitalisation has decimated the bank sector and the spectre of a similar fate stalks the insurers currently. We would argue vehemently that insurers are not banks — lower asset leverage, solid liquidity fundamentals — and that the sector has shown its more defensive qualities during the current market upheaval. However there is a market level where insurers become vulnerable. Amongst its European peers, we see Aviva as one of the most at risk of slipping into re-cap.

"The group has reserved as best as it can for corporate bond and mortgage loan defaults but there still remain concerns — particularly within the hybrid component of the corporate bond portfolio and given the high LTVs [loans to value] in the loan books. Outside of this, the group has material exposures to equities and real estate (inclusive of the pension fund) and, particularly within its Dutch and US business, could have some significant guarantee issues if risk free rates come over 100bps lower.

"Given the level of asset leverage, the solvency looks thin — Aviva has the lowest coverage ratio in the European sector. We are not wholly convinced that there is significant flexibility to boost solvency should markets deteriorate further.

"In this context, we question the decision to maintain the 2008 dividend. Operating cash and free capital generation does little more than cover the dividend payment and there are potentially significant pressures going forward as lower market levels constrain the in-force cash generation and on the assumption of some further deterioration in non-life results (reduced investment earnings/ lower prior year releases).

"In our view, if the dividend policy is maintained, the balance sheet will not regenerate from future operating earnings. This leaves it in the hands of markets: already equities have fallen materially and real estate values are still dropping. If markets recover, Aviva's solvency should be able to cope. But further market falls would increase the pressure."

 

[Charpress]

At least now I have a good excuse to give my 82 year-old client who agreed to put a big chunk of money with Aviva a couple of days before they pulled the rug out from under me.

"Sorry. Those c**k suckers at Aviva decided they don't want your business since 82 was OK last week but is not OK this week. Let's look for a more stable company to put your money with."

 

[indaville]

We just got notice that we are being cut as of last Friday!!! I have paid for over $9,000,000 with American Investors in the last 9-months. I have put $2,000,000 with Aviva.

We have $1,600,000 pending with AI and another $1,200,000 pending with Aviva. We are protected on the Aviva side but the FMO that had my AI contract was told we only have until 4/1/09 to get the business in. A week and half to get $1.6M in!!!!

Can I sue them if I lose business??

Matt

 

[PaulC]

I don't know if you can sue. I doubt it.

I do know if it does NOT come in before the date they gave you that they have been rejecting the money from terminated agents clients in similar situations. One terminated agent I know of could not get the case issued even if a licensed agent, who was still appointed, signed the application.

I suggest you better find another carrier or else they will send the money back. Besides, I don't know why at this point you would feel safe placing your clients with them even if they did take the money. They are canning you and will only try to take them from you in the future. Do yourself a favor and save your clients and yourself from a lawsuit against you for placing your clients in a company that you knew at the time was in financial crises.