In a note sent to investors yesterday, the insurer flags that Sesame, which posted a £19m loss in 2013, is “reliant on the continued financial support of its ultimate parent, Friends Life” to continue to trade. It warns the network has unquantifiable “potential liabilities” arising from poor advice.
Aviva says Sesame will “no longer be viable” without the financial support of the new company created by the merger, but warns the reputational impact of allowing the business to fail could “adversely affect” the finances of the Aviva group.
Aviva says: “Such reputational damage or any resultant loss of customers or negative market perception could adversely affect the Friends Life group’s and, following completion of the proposed acquisition, the enlarged Aviva group’s results of operations and financial condition.”
Friends Life’s strategic review of Sesame is ongoing.
The note also reveals 1,500 jobs are at risk as a result of the merger, which would create the largest insurance and life business in the UK.
Sesame was fined £6m by the FCA in 2013 for failing to give appropriate investment advice, and was fined £1.6m in October for setting up “pay to play” distribution deals.