Aviva sells loss-making FPI to IFG for £340 million

The British insurer Aviva’s decision to sell its Middle East and Asia-focused Friends Provident International (FPI) business to International Financial Group (IFG) for £340 million (US$443m) is a result of the company’s strategy to focus on profitable markets aligned with its goals, officials said yesterday.

Aviva said the decision to offload FPI, which sells offshore investment, savings and protection products and made a post-tax loss of £2m last year, followed a review of the business and a string of asset sales in Spain and France.

Chris Wei, the executive chairman of Aviva  Asia and FPI, said the sale allows the company "to focus on the significant opportunities we have to grow Aviva's business across Asia through digital and disrupting the traditional insurance industry".

Sam Instone, the chief executive of the financial advisory company AES International, said: “The complaints ratio, payouts to customers, profitability and the reputational issues associated with FPI made it a very unattractive business for Aviva.”  Aviva acquired the entity in 2015 through the £5.6 billion takeover of Friends Life.

“Aviva has clearly looked at FPI over the relatively short period they have owned it and have found it incongruent with its vision of making the world better,” said Mr Instone.

Meanwhile, the Isle of Man-based IFG, previously known as RL360 Group and the owner of the RL360° brand, said yesterday that the deal was part of its plan to become the market leader in offshore savings

“We think FPI is a good company. There is lots of regulatory upheaval going on in the market but there's still potential and we felt there is room for a very big Isle of Man based provider using M&A to get scale to try to be the pre-eminent player," said David Kneeshaw, IFG’s chief executive.

The tie-up comes as the life industry has been battered by complaints from customers claiming to have been mis-sold expensive fixed-term investment products.

"Life insurers selling costly and inflexible savings plans are not popular with people in Dubai who have been burned by them and it seems now they are not popular with more progressive global insurance companies either," said Steve Cronin, the founder of WISE (wiseuae.com), a non-profit community helping expats to invest sensibly. "I hope RL360° takes this opportunity to radically assess the savings offerings of both companies, as we don't need any more plans offering poor value in the UAE."

This month, FPI, one of the biggest providers of expensive fixed-term investment plans in the UAE, admitted that its products were failing customers.

Philip Cernik, FPI's chief marketing officer, said the life industry "could do better".

In an exclusive editorial for The National, he acknowledged the rise in complaints to the UAE Insurance Authority about life companies and the financial advisers that market the investment products, from customers frustrated by poor performance and very high costs.

FPI is also headquartered in the Isle of Man. IFG, which formed in October 2013, to support the management-led buyout of RL360° Insurance Company from the Royal London Group, has more than £8bn in assets under management. It administers 70,000 policies and employs 300 staff. FPI has £7.6bn in funds under management and its addition to IFG will take the group's combined assets to £15.9bn and policies to 250,000.

Mr Kneeshaw said all FPI polices will be unaffected by the sale, but added that a working group would review jobs as part of the takeover process, which should be completed by the end of the year subject to regulatory approvals. FPI's Dubai office has about 100 staff, he said.

Nigel Sillitoe, the chief executive of the market intelligence firm Insight discovery, said the partnership will strengthen RL360°’s position in the market.

“With nine international life companies operating in the region it was inevitable that there would be some consolidation in this segment of the market. On the surface, it seems like a positive move for RL360° as FPI has an established book of business and a license with the UAE Insurance Authority (IA), which will now allow RL360° to market their products and solutions to advisory firms licensed by the IA.”

RL360° is not licensed by the IA, but Mr Kneeshaw said it has a Ministry of Economy licence and sells investment products to brokers licensed by the Emirates Securities and Commodities Authority.

To offer investors better protection, the IA confirmed in April that it was pushing ahead with tough new regulations to transform the way savings, investment and life insurance products are sold in the UAE. Among the proposals were plans to impose maximum limits on the upfront commission advisers can earn from life companies.