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Aviva warns on impact of Sesame liabilities

Aviva has warned shareholders about the implications of taking on unknown liabilities relating to Sesame following the insurer’s takeover of Friends Life.

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.


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. I imagine that many long-standing Sesame members who may potentially be ensnared by these legacy issues will be hoping that they can find a new home PDQ and that, not long after they’ve done so, that Aviva does allow the Sesame ship to go down, taking with it to the bottom of the sea all their past liabilities.

    There are probably a fair few former Burns Anderson members who are very relieved that they managed to get out before that particular train hit the buffers (and a fair few more who wish they had).

    Ken Davy saw all this coming and got out at the right time.

  2. Infinity is unquantifiable. That is the problem with the F-packs unjustifiable removal of the 15 year longstop from the rulebook when it changed from PIA to FSA.

    I can see AVIVA as a result of the Sesame issue now pushing for re-insertion of the longstop to the rulebook which is really annoying when advisers have been trying to explain to the F-pack for years, that the longstop applies to the PROFESSIONAL negligence issues and not product faults and misrepresentation.

    The argument I had tried to put to the F-pack was that if we provide an ongoing service to our clients, which they PAY for, then everytime we carry out a review of an existing product or service, we should be reviewing it’s CONTINUED suitability and picking up any earlier errors. As such, the longstop should not “crystallise” unless or until a client ceases to pay us for our ongoing PROFESSIONAL services, at which point a 15 year clock should start ticking. If the now consumer (as they are no longer a client) fails to take fresh professional advice within 15 years, TOUGH. If they take advice from some other adviser and they fail to pick up the mistake, within 15 years of the original advice, both the old and new adviser would in part be liable and after 15 years from the original advice, the new adviser may still be liable until 15 years from their failure to pick up the original advisers professional negligence.
    The above may sound complicated, but it can be demonstrated visually VERY easily and it can be priced by a PI company unlike infinity……
    It’s a pity the F-pack chose not to discuss this suggestion with me when we drafted our client terms about 5 years ago and instead decided to bluster, bully and threaten before finally accepting that the wording of our agreements was perfectly clear, fair and NOT misleading unlike what they were trying to get us to draft, which would not have been clear fair and not misleading as the longstop DOES apply if a Ltd company firm ceases to trade as the FSCS step in rather than FOS and the FSCS have to abide by the longstop,

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