Meet Aviva France, the world's dumbest insurance company

[merkhet]

http://ftalphaville.ft.com/2015/02/27/2120422/meet-the-man-who-could-own-aviva-france/

[merkhet]

Technically, it was a predecessor company (L’Abeille Vie) that made the stupid contract, but there should be a team of lawyers/bankers that should be drawn and quartered for poor due diligence when they folded L’Abeille Vie into another company.

[LC]

Spinoff that division and let it go bankrupt?

[rb]

Spinoff that division and let it go bankrupt?

I think that's probably the best course of action.

 

However, I think that the same arrogance and hubris that made them sell those contracts is now telling them that they can probably beat this and keep their franchise as well... or something along those lines.

[beerbaron]

I don't know about France but usually an insurer cannot get rid of a bad set of policies by spinning, giving or selling the company. It happened with Kingsway a few years ago, they tried to give a whole insurance company to charity and it was stopped by the legislators.

 

This is a funny story, glad I'm not an Aviva shareholder.

 

BeerBaron

[rb]

I don't know about France but usually an insurer cannot get rid of a bad set of policies by spinning, giving or selling the company. It happened with Kingsway a few years ago, they tried to give a whole insurance company to charity and it was stopped by the legislators.

 

This is a funny story, glad I'm not an Aviva shareholder.

 

BeerBaron

I don't think in this case it's selling the company. I don't think anyone would be as dumb as Aviva to buy it with those set of contracts on the books. It's more of the case of letting it wither away. The contract is with the French division of Aviva and I am sure the French division is a separate legal entity (esp since it was an acquisition). As the contract increases in value it hits the French division capital. If headquarters doesn't top up capital, then that division will slowly wither and die and get amputated from the company.

 

Now the French and Aviva's competitors may have a real problem with that. I don't know the regulations in France, but usually life policies are insured by the state. Hopefully they have an upper limit on that.

[merkhet]

I suspect that hiring a contract killer has crossed the minds of Aviva's board once or twice. This is life insurance, after all.

[rb]

I suspect that hiring a contract killer has crossed the minds of Aviva's board once or twice. This is life insurance, after all.

Sure, because Aviva employees would love to go to prison for conspiracy to commit murder. Think about it, it's the shareholder's money not their own....

[merkhet]

I suspect that hiring a contract killer has crossed the minds of Aviva's board once or twice. This is life insurance, after all.

Sure, because Aviva employees would love to go to prison for conspiracy to commit murder. Think about it, it's the shareholder's money not their own....

 

I would wager a pretty large sum that it has come up as a joke at least once. I would wager a smaller sum that it was then followed by awkward silence and then assurances all around that it was a joke. :P

[rb]

I suspect that hiring a contract killer has crossed the minds of Aviva's board once or twice. This is life insurance, after all.

Sure, because Aviva employees would love to go to prison for conspiracy to commit murder. Think about it, it's the shareholder's money not their own....

 

I would wager a pretty large sum that it has come up as a joke at least once. I would wager a smaller sum that it was then followed by awkward silence and then assurances all around that it was a joke. :P

Now that I can see  ;D

[Pelagic]

Mr George has also started to add fresh capital to the account governed by the contract, €19.9m last year, helped by a loan from the Swiss arm of a French Bank. (He is a French citizen, but lives in Switzerland). He said the contract terms allow him to add more cash to the pot. “I can take all the money in the world and invest it, there is no limit”.

 

He's just now starting to use leverage  ???

I wonder what kind of securities are available for purchase in that account, it must not be individual stocks or heaven forbid futures, options or any kind of leveraged ETF otherwise the insurance company would already be broke.

[nodnub]

Merkhet thanks for posting this article.  Reading this has given me my best laugh of the week :)

[peter1234]

Now I understand. I thought they just made up hindsight capital.

;D

[Jurgis]

Now I understand. I thought they just made up hindsight capital.

;D

 

This is where you hold your assets.  8)

[TwoCitiesCapital]

Incredible! Thanks for sharing

[vertek]

Possible short opportunity?

 

- vertek

[rb]

Possible short opportunity?

 

- vertek

I don't think so. The article is a bit sensationalist with the long term compound projections. I don't think the loss to AVIVA gets higher than 1 Bn USD, an that would take years. Aviva's mkt cap is 16 Bn GBP.

[watsa_is_a_randian_hero]

Spinoff that division and let it go bankrupt?

I think that's probably the best course of action.

 

However, I think that the same arrogance and hubris that made them sell those contracts is now telling them that they can probably beat this and keep their franchise as well... or something along those lines.

 

this would not be allowed

 

google the term fraudulent conveyance.

[rb]

Spinoff that division and let it go bankrupt?

I think that's probably the best course of action.

 

However, I think that the same arrogance and hubris that made them sell those contracts is now telling them that they can probably beat this and keep their franchise as well... or something along those lines.

this would not be allowed

 

google the term fraudulent conveyance.

I know there's a ton of laws and regulations around this stuff. You seem to be more knowledgeable on this topic than I am. I guess I am wondering how could the French regulator force the British parent to provide more capital to the sub if they don't want to.

 

I am genuinely interested if you can provide more colour.

[Tim Eriksen]

Possible short opportunity?

 

- vertek

I don't think so. The article is a bit sensationalist with the long term compound projections. I don't think the loss to AVIVA gets higher than 1 Bn USD, an that would take years. Aviva's mkt cap is 16 Bn GBP.

 

Is it sensationalist?  The compounding numbers were just for Max.  He can't be the only one left with such a contract.  While it said his father's was no longer active, it noted that  Max was only 1/15 of the family's funds in 2007.  There could be five or ten others.  So the current hit to earnings could be multiples of what they showed. 

 

If you are Aviva how much do you offer to settle?  If you are Max how much would you require to settle? 

[rb]

Possible short opportunity?

 

- vertek

I don't think so. The article is a bit sensationalist with the long term compound projections. I don't think the loss to AVIVA gets higher than 1 Bn USD, an that would take years. Aviva's mkt cap is 16 Bn GBP.

 

Is it sensationalist?  The compounding numbers were just for Max.  He can't be the only one left with such a contract.  While it said his father's was no longer active, it noted that  Max was only 1/15 of the family's funds in 2007.  There could be five or ten others.  So the current hit to earnings could be multiples of what they showed. 

 

If you are Aviva how much do you offer to settle?  If you are Max how much would you require to settle?

The reason I said it was sensationalist is because from what I recall from reading the article the number for the payout tops out at around 230 Bn EUR. That's obviously never going to happen if Aviva's mkt cap is 16 Bn GBP but newspapers love printing large numbers.

 

You are correct that there are also other policy holders, which makes the problem bigger. But I also think that if Aviva recognizes this as a massive issue, they'll start defunding their French sub. Another poster mentioned that by law they may have to fund the French sub, I wish to know how. I can't figure out a way how a French regulator may force a British parent to fund the local sub if they don't want to. They could seize Aviva France and refuse an insurance license for Aviva in France. But between that and giving the company to Max, I think the choice is simple.