by John Darer® CLU ChFC MSSC RSP CLTC
Aviva Transfer of Structured Settlement Business to Athene
The transfer of Aviva USA's structured settlement business to Athene Insurance was completed in early 2014. While there has been a limited amount of trade press, there appears to have been very little public information disseminated to structured settlement annuitants about how the sale of Aviva USA impacts them. This has caused a needless amount of concern.
Aviva Annuitant Expresses Concern
Yesterday I received a call from a concerned structured settlement annuitant from Hawaii, who entrusted "all the money he had in the world" be placed into an Aviva structure settlement by one of my competitors. A payment was late and so he contacted the number that he thought was Aviva and the phone answered Athene. On August 29, 2014, months AFTER the sale of Aviva USA to Athene was concluded, he wrote to Amanda Walker saying that he received no notification that Aviva sold its US business to Athene.
Upon learning of the sale of Aviva USA and discovering that Athene has a C rating from Weiss, he was trying to determine if the so-called "Capital Maintenance Agreement" that was sold as part of the Aviva placement still applied. He was simply seeking reassurance and unfortunately got none when he contacted the number that he thought was Aviva and the phone answered Athene. Between him and I we have spoken to 4 different people at Athene who have tried to help but have given conflicting answers. The responses are inconsistent with what I was told in August 2013 at the time the buyout was pending and subsequently reported here on August 22, 2013.
Aviva Attorney Gives Squirrely Response
Most concerning was the email response of Neil Harrison September 3, 2014 at 4pm BST, who stated that he works in Aviva's legal team (in London), who responded to an email from the Hawaii annuitant with the subject line "will Aviva still honor its absolute and unconditional CMA obligation?", confirming the sale of Aviva USA but failed to answer the posed question.
What is the Aviva Capital Maintenance Agreement?
Aviva Life Insurance Company and its New York subsidiary, were very competitive in the marketplace until they ceased underwriting new structured settlement business in late 2008. But the company was A rated by A.M. Best, when it began to actively wrote structured settlement annuities, at a time when the majority of the structured settlement annuity market had A.M. Best ratings of A+ or better. To make its product more appealing, particularly for cases involving minors, Aviva London Assignment Corporation, a Delaware Corporation entered into a Capital Maintenance Agreement with its indirect parent, CGU International Insurance, plc (CGUII), a company incorporate under the laws of England and Wales [later Aviva International Insurance plc].
The provisions of the Capital Maintenance Agreement as set forth in the brochures filed by Aviva with state insurance regulators [to wit Download Aviva London Capital Maintenance Agreement brochure], and in a notice delivered by Aviva with each and every Aviva contract subject to the Capital Maintenance Agreement, were as follows:
that "CGUII has, under the terms of the Agreement agreed:
1. To maintain sufficient capital in Aviva London Assignment to ensure that it has the necessary funds available to satisfy all structured settlement obligations assigned to and assumed by Aviva London Assignment and in accordance with Section 130(c) of the Internal Revenue code as amended; and
2. that the foregoing obligation shall be absolute, unconditional, present and ongoing.
The Capital Maintenance Agreement Notice delivered with each policy said "This will confirm that the above referenced annuity was assigned to Aviva London Assignment during the term of the Agreement. CGUII in making this Agreement, is not acting as a reinsurer or an insurance company".
As you can see, the financial ratings and size of CGUII were the focus of the CMA brochure and a key part of the value proposition to place business with Aviva.
Aviva USA Executive Referred to CMA As a Form of Guarantee, in Writing
On May 20, 2004 Richard J. Kypta, then Senior Vice-President of Aviva issued a letter in support of an affidavit being submitted to the New York State Supreme Court Erie County [client name redacted] that referred to the Capital Maintenance Agreement as a guarantee. [ To wit " This will confirm that Aviva offers two forms of guarantees on structured settlements on cases that are assigned to Aviva London Assignment Corporation... The second is a Capital Maintenance Agreement(CMA)..." Download Aviva Kypta letter to JDarer 5-20-2004 re CMA and guarantees
In a November 16. 2005 press release that served as a huge catalyst to Aviva's structured settlement sales, A.M. Best announced that it ha upgraded Aviva Life to an A+ stating "the ratings of Aviva Life and its subsidiary reflect A.M. Best's view of their status as "the U.S. operating subsidiaries of their ultimate parent, Aviva plc (United Kingdom) and the strong financial support provided by the parent through both capital contributions and reinsurance" Most significant is the A.M.Best observation that "in recent years, Aviva Life has received capital contributions of $262 million from the parent to support the growth of the wealth accumulation business and offset the statutory operating losses due to new business strain. In addition, a capital maintenance agreement is also in place to support the anticipated growth of Aviva Life. A.M. Best recognizes that this strong parental commitment to Aviva Life will continue as Aviva plc expands its wealth management strategy in the United States.
Aviva wrote a lot of structured settlement annuity business. They were favored by plaintiff brokers for the fact that they would accept a qualified assignment from single claimant qualified settlement funds. Their underwriting was extremely competitive and they had a fantastic customer service team through the time they stopped writing new structured settlement business at the end of 2008.
What Needs to Be Done by Athene Annuity and Aviva
1. Aviva International Insurance plc (the old CGUII) must answer the question about the Capital Maintenance Agreement which was, irrefutably, an intrinsic part of its marketing effort to write billions in structured settlement premium. The operative question is if the soon to be renamed Athene London Assignment Corporation gets low on cash, will Aviva International Insurance plc pony up the capital under the terms of the CMA in place at the time the contracts were placed?
2. Athene took on the structured settlement run-off from Aviva. There is no new premium coming in, but Athene must still provide informed and compassionate service that is perceived as more than a payment processing service to structured settlement annuitants. Many of the structured settlement brokers and settlement planners I know are aware of, and some sell, the Athene Equity Index Annuities so please treat our industry's clients in an informed way that does not increase their anxiety. Call in center representatives must be given adequate training that, in my opinion, that should include a structured settlement FAQ sheet that includes the basic history of Aviva structured settlements. Predecessor companies to Aviva included a number of name changes due to acquisitions:
- CU Life Insurance Company
- CU Life Insurance Company of New York
- CGU Life Insurance Company
- CGU LIfe Insurance Company of New York
- CGNU Life Insurance Company
- Aviva Life Insurance Company
- Aviva Life Insurance Company of New York and maybe one or two more.