Max-Hervé George, 25, owns a financial contract that may well be the best financial deal in the world: a “magic ticket” that allows him to invest as if he knows the future.
George and his family own life insurance contracts issued in the 1990s. These so-called “cours connu” or known-price arbitrage contracts, are unbelievably generous. That’s because George can switch his investments based on their closing prices during the previous week. So if one of his investments does badly in any given week, it’s not a problem. He can just switch it next week, and get last week’s prices.
The contracts were originally issued by L’Abeille Vie, a defunct French insurance company that became Aviva in 2002. Since then, Aviva has tried in court to change the terms of the contract. However, both the French High Court and the Supreme Court ruled in favour of George’s position last year.
Currently, a minimum of thirty people are in litigation with Aviva. But there could be thousands of more contracts floating around, according to George.
It would be a colossal headache for Aviva if the cases continue to be upheld.
The French High Court confirmed last year that George’s funds have an implied growth rate of 68%, based on returns from 1997 to 2007.
If continued, the fund would explode in value, rising to billions of euros and eventually swelling to be worth more than Aviva itself.
Click on the graph at right to see how rapidly George’s contract would rise in value if it kept up the same value in the years ahead.
George is even raising the prospect that Aviva’s massive potential liabilities from the contract in future years could affect its merger with Friends Life.
“Obviously customers and Friends Life shareholders might well face a problem because today they are investing in Friends Life where all the risks are fully known and tomorrow they will own shares in Aviva,” he said in an interview via email.
Aviva France says that the contracts will not affect its solvency, insisting that the idea the liabilities could run into the billions are “whimsical and excessive,” or “fantaisistes et excessifs.” The March press release sent out by Aviva also suggests that the contract owners are trying to put pressure on the company so that they can negotiate higher compensation in legal proceedings.
Aviva refused to comment on any of the specific issues raised, but provided Business Insider with this short statement: “Aviva France has been managing this issue for over a decade. It’s not new. The excessive sums being mentioned are speculative and without foundation. Aviva France remains appropriately provisioned and its reserves are reviewed annually with the French regulator.”
We spoke to Max-Hervé George about his nearly unbelievable contract and his current battle with Aviva. A lightly-edited version of the transcript is below.
Business Insider: Have you managed to avoid any major market crashes? In 2008, for example?
Max-Hervé George: It is not possible to lose as the possibility to go back a week in time is in my favour. I can position my funds into the Aviva equivalent of a money market fund so I can wait or see what happens and make a trade knowing what will have happened.
BI: Did your father ever explain why he didn’t agree to sign up to a different contract while the vast majority of other holders did?
MHG: Of course, my father refused to sign the amendments proposed by the company. Some other contract holders did agree to sign, but my lawyer, Nicolas Lecoq-Vallon, has persuaded the courts that most of these amendments were “fraudulent” by being “misleading” and has thus managed to invalidate them.
BI: Do you know anyone else, apart from your own family, with the same or similar asset?
MHG: A minimum of thirty people are now in litigation against the company and tens thousands of contracts are likely still to be “out there.” One never knows but it might be expected that the publicity will wake some of the contract holders up to what they still have, as every day Nicolas Lecoq-Vallon receives enquiries from new clients.
BI: How long do you expect that the contract will last — until Aviva can no longer pay? Do you expect to become a billionaire?
MHG: I can’t really answer that question as it is not whether I might become a “billionaire” as you ask, but rather when will the fifth-largest insurer, with over 38 million customers worldwide, honour the contract I have and stop violating the judgement of France’s highest court.
The contract can and will run until I die — but I should point out that I’m only 25.
The real question therefore is how can an insurer like Avia, a company entrusted with millions of peoples’ savings, listed on several stock exchanges around the world in places such as New York, London, and Frankfurt, fail to respect its contractual commitments?
(George also criticises the people who drew up the contracts in the first place, noting that they were often the very same people that ended up buying into them.)
BI: What do you think of the people who initially drew up and offered these contracts?
MHG: The managers who were responsible for introducing these contracts were quite often the very people who also took advantage of them and signed themselves up to them. They knew very well they were signing themselves up to their own gold-plated pensions.
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