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Financial Planning > Behavioral Finance

What if Aviva USA Were Sold?

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Last week, the Financial Times reported that Aviva PLC was mulling the sale of its U.S. unit. Although the U.S. is on a list of 12 countries identified by Aviva as “core,” the division is under pressure as it specializes in selling fixed indexed annuities, a type of policy that offer savers guaranteed returns, but which require the group to set aside large amounts of capital.

The euro zone crisis

Aviva has had to deal with several headwinds in recent months. It recently dismissed suggestions it would move its corporate headquarters outside of the U.K. after addressing fears that its capital position is being eroded by the euro zone debt crisis.

In November 2011, the group spooked investors by revealing that falling euro zone government bond prices had wiped 30 percent off its surplus capital between July and September, weighing on its shares.

Andrew Moss, Aviva’s chief executive, said the company had made “good strategic progress” during the year. He insisted he was optimistic that international efforts to overcome the fiscal crises in Greece and other heavily indebted euro zone nations were now beginning to work.

In March, the company said its capital surplus stood at £3.3 billion as of February 29, compared to £2.2 billion at the end of the year. Aviva’s shares have risen by almost 20 percent since the turn of the year.

Forthcoming Solvency II regulations in Europe could increase Aviva’s burden, however. European insurers have complained that the new rules will make their U.S. operations uncompetitive against American rivals. Prudential PLC has previously threatened to relocate to Asia over the issue.

Aviva USA has sought to boost its profitability by writing less business at higher prices. The Financial Times notes that sales fell 17 percent last year, but operating profits rose 13 percent.

Yet Aviva PLC shareholders recently breathed a sigh of relief as the insurer, which has been buffeted by the euro zone storm, held its final dividend and maintained its high yield.

The high-yielding dividend looks fairly secure after March 2012’s full-year results. Nevertheless, the cloud over the company’s prospects will only be fully lifted by a solution in the euro zone crisis.

What it means for advisors

What does all this mean for advisors and agents who offer Aviva products? How can they address these issues with clients?

Advisors can be proactive by conducting an annual review with their clients. Policyholders have the security of their annuity contracts and the features that will provide the stated benefits. The question of what will happen with Aviva does not risk the contractual arrangement your client has with Aviva. This is not an issue similar to AIG back in 2008; this is a proactive business decision that, if reports are true, is merely being discussed.

There is an old saying in sales–success is when opportunity and preparedness meet. If anything this provides you an opportunity to show your value to your client by contacting them, performing an annual review and helping them draw up a game plan when their current contract matures. Help your customers be prepared for the next decision they may need to make in managing their assets and fulfilling their financial goals. To be sure that the prospect is engaged, you have to use language that “takes charge” of the meeting with the prospect.

People don’t want to take their valuable time to deal with uncertain salespeople—they want to be sold on what you’re selling. So the language you use when working with prospects has to be powerful, not passive.

Features vs. Benefits

If you have been selling for a very long time, you have heard about the concept of “features versus benefits.”

  • Features are what the product has or does.
  • Benefits are why your prospect would want those features.

In other words, features are about the product, benefits are about the user. What will the product do for them?

For example, if you have something that is metal instead of plastic, metal might be a feature. But the benefit might be that it is more durable, longer-lasting or unbreakable.

So when you meet with your client to discuss their current situation:

  • Review their current contract
  • Review their current financial plan
  • List the gaps and/or risk
  • Develop a risk strategy
  • Implement the strategy on or before the maturity date of their contract

Remember, success is when opportunity and preparedness meet.


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