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Apps keep flowing at AIG: Pierce

AIG Life says although its parent company was on the brink of collapse last week proposals for insurance kept coming in.

Tuesday, September 23rd 2008, 8:51AM
AIG Life chief executive David Pierce says one day last week got close to being a record for number of applications received.

Pierce says the deal with the US Federal Reserve is not a bail out, rather the bank is providing a line of credit to help the company.

Pierce says now the liquidity issue has been solved, “We can now take a breath, and get our acts together and pursue an orderly sale of some assets.”

He says the real issue is what are those assets going to be sold? Pierce says he doesn’t have a crystal ball and doesn’t know if AIG will sell non-core assets, assets which could be liquidated easily or assets which show good growth.

“I honestly don’t know,” he says.

When asked if AIG Life in New Zealand was on the market, even before the crisis hit, he said AIG doesn’t comment on market rumours.

He says that selling AIG Life won’t make a big contribution towards the US$85 billion Federal Reserve loan.

“If people think that selling of these particular assets would somehow play a major role in helping pay off this loan then they don’t know much about economics.”

Pierce says AIG Life has been growing in the current market and it increased its net profit from $3.9 million in the year to November 2006, to $9.3 million in the 2007 financial year. Currently it is on track to make a profit of around $12 million in the current financial year.

AIG Life was holding its own in market share, and Pierce noted that it was very hard for the mid-sized life companies in New Zealand to make an impact, market share-wise, on the top three players (Sovereign, AMP and AXA).

He doesn’t have a simple answer why the mid-sized companies can’t make more impact. Possible reason are that brokers are too entrenched with their providers and are “creatures of habit” or maybe because life companies haven’t done enough to differentiate themselves.

The good news for AIG Life is that it is number two in the growth area of business insurance.

Strategy Financial director Graeme Lindsay says advisers and policyholders needn’t worry about the issues around AIG in the United States.

He says AIG’s Southeast Asian operations, of which AIG Life is part of, are relatively immune from the events in the US.

“There is no reason for policyholders to be worried.”

If the business is sold they will just “see a different name on their next renewal statement.”

« Opinion: As old as the hillsHealth insurance needs a revamp »

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