Aviva Cutting Contracts of 11 Out of Its 50 IMO's!

[cloisbarton]

I received this email from the IMO I work for

"Aviva/ American Investors is having financial problems. As a result, they had to cut over ½ of their annuity distribution because they couldn’t afford to sell the same amount of product they had in the past. We are getting their contract reinstated to sell life insurance with them, which will include annuities. 11 out of their 30 IMOs were cancelled; the biggest ones."

Are any of your contracts getting canceled? What is the word on the street from AVIVA producers out there?

 

[djs]

More are bound to follow. A lot of annuity money tied up in real estate which is hard to sell right now. hard to make distributions if you can't get the cash out of the assets.

If you can't pay distributions, or have to cap them, you probably can't take in new money either. (which, ironically would help pay distributions, but Madoff got in trouble this way).

Dan

 

[Charpress]

Your IMO might have put a little bit different spin on this. I would try and spin this too in their position. My own FMO had their spin as well. Today, I received the FMO cancellation letter from AVIVA saying my FMO was out of the picture for them but that they would not release me without my FMO's permission. Luckily, I'm contracted with someone else as well that is not having this problem. I think your IMO's letter was intended to beat Aviva's letters that Aviva sent directly to producers a couple of days ago.

Aviva cut FMOs that weren't producing $30 million (or $50 million, depending on who you listen to) because they wanted a core of big production FMOs. They also want all policies to be submitted through FMOs and not directly from producers because they have so many apps that are flawed and need work.

As I've said in other threads, the app problems are Aviva's own making as far as I'm concerned. I think Aviva is showing the same problem as Forethought: terrific marketing with products that are good, but then getting caught with too much success. The difference is that Aviva can handle it --I'm not so sure about Forethought.

 

[insuranceexec]

I agree with you Charpress. It is Aviva's doing because of the similarities in all of the apps and brochures. With all that being said many of the IMO's will have their own spin of why Aviva is cancelling contracts. The fact is they have NOT cancelled their contracts because they were not doing their job of scrubbing the apps. The real reason is that if as an IMO, you did not produce at least 50mil in production they do not want that IMO. Aviva is financially secure, and made this information available about two months ago to all of the IMO's. I was able to keep my contract with Aviva, and pay above street on all of their products. If anyone needs a contract; I can help them.

 

[patch36]

Aviva is not having financial problems. As was pointed out, they are eliminating the smaller IMO's due to lack of production. It would be surprising if the cut IMO/FMO are actually saying that AVIVA is the one with the financial problems, when it is simply a matter of cutting off contracts to low production high maintenance Marketing Groups. Their products are more popular than ever and they are one of the, if not the largest Annuity Company.

 

[Brokers Alliance]

Aviva is not having financial problems. As was pointed out, they are eliminating the smaller IMO's due to lack of production. It would be surprising if the cut IMO/FMO are actually saying that AVIVA is the one with the financial problems, when it is simply a matter of cutting off contracts to low production high maintenance Marketing Groups. Their products are more popular than ever and they are one of the, if not the largest Annuity Company.

Excellent summation. Fully agreed.

 

[Charpress]

I have been wondering why any insurance would turn away $10 billion in business, which essentially is what Aviva is doing by cutting the lower 11 FMOs from their contracting. That did not make sense.

The latest word I have is that Aviva simply did not want to continue to put that much in reserves. They made the decision that based on the US requirements and the economy back in the UK and around the world, it made sense to cut a figure out of production to reduces the reserves requirement and the method they chose was to cut enough of the lower producing FMOs to achieve the lower reserve requirements they were shooting for.

I guess that makes sense, if you want to reduce the business you spent so much time and money trying to accumulate. It's the economy, stupid.

 

[djs]

Insurance companies tend to shy away from business when their reserves have shrunk in relation to the new business. In many cases, the DOI will stop a company from issuing any more policies (or annuities), or put them on a replacement only basis. Happens all the time in the P&C market.

In reading about Aviva, they have apparently had significant problems selling some real estate holdings at a reasonable price. Now, it doesn't sound like a problem, but just an issue they have run into. In fact, in Europe, it seems they have halted withdrawals on some lines due to this.

So, in the end, if you can only write x amount of business, why not limit it to the more profitable producers / FMO's? Makes sense to me.

I'm no annuity specialist, but I imagine a lot of companies are staring at the same issue, and many will make the same move soon. In todays market, it is difficult to offer the guarantees that annuities do, that money has to come from somewhere.

Dan

 

[Charpress]

Yes, exactly. It is like a big life company looking at current underwriting as a way to cut exposure. Simply tighten up on underwriting a notch and turn down apps that would be less profitable. The same apps that looked good enough to approve last month would be turned down, or rated, this month. Less production, but more profit on what is produced.

 

[patch36]

But if an agent really likes AVIVA, he just gets appointed with another Marketing group. Are any of the marketing groups that were cut actually refusing to release agents to move to another? Do the agents even need a release?

Even so, if this is the reason they cut FMO's, then they have considered that a certain number of agents will simply move to another FMO rather than not sell AVIVA. I quit selling them about 2 years ago due to an FMO they owned going out of business and I found a company I preferred to them.