First Financial Holding Co (第一金控) said yesterday it was unable to reach Aviva PLC executives in Asia after the British insurance giant’s unilateral announcement a day earlier that it was exiting their joint venture, First-Aviva Life Insurance Co (第一英傑華人壽).
The state-run First Financial said it aimed to keep the life insurance subsidiary, although it has accumulated NT$1.33 billion (US$44.2 million) in losses as of March 31 and needs a capital injection next year.
“While Aviva has expressed a desire to pull out for two years, the unilateral announcement on Thursday caught us off guard,” First Financial spokeswoman Hung Hsin-shih (洪新湜) said by telephone. “We have been unable to reach Aviva executives for talks about their intentions.”
Aviva said in a press statement on Thursday that it was in the process of seeking regulatory approval for its plan to withdraw from the Taiwanese market because the British firm aimed to focus on higher-growth markets.
“It is odd the British partner took the case to the media without giving [us] notice,” Hung said. “It should have talked to us about how it intends to terminate the partnership.”
First Financial and Aviva have not seen eye-to-eye since shortly after First-Aviva Life was created in December 2007, Hung said.
First Financial, which owns a 51 percent stake in the joint venture, favors selling short-term investment-linked insurance policies because they are more popular with Taiwanese customers, while Aviva, which holds the remaining 49 percent, prefers traditional life insurance and pension products because long-term policies pose a lighter burden on provision reserves, she said.
“The Taiwan side is well aware of the benefits of protection insurance policies for the joint venture,” Hung said. “However, the low interest rate environment makes such policies unattractive and the sales channel has the upper hand in setting product and sales strategies.”
First-Aviva Life, which relies on the 189 branches of First Commercial Bank (第一銀行) to sell its products, reported NT$46 million in net income in the first quarter, reversing three consecutive quarterly losses of NT$268 million, NT$143 million and NT$184 million, although Aviva had said it would take six years for the venture to turn profitable.
Despite the earnings improvement, First-Aviva needs to increase its capital next year to remain financially healthy, Hung said.
“Our British partner appears unwilling to take part,” Hung said. “Nonetheless, both sides have to sit down and talk about the future of First-Aviva.”
The Financial Supervisory Commission also expressed surprise at Aviva’s announcement, but stressed that it had not said Aviva could not withdraw from the market as local media had suggested.
“The British company should straighten out its exit details first before filing to withdraw,” said Chen Kai-yuan (陳開元), deputy director-general of the commission’s insurance bureau.