American International Group has regained its role as a primary seller of insurance and investment products through banks, president and CEO Robert Benmosche said at an investment conference Wednesday.
Benmosche made his comments at the Bank of America Merrill Lynch Insurance Conference, held in New York.
Discussing the viability of its primary operating businesses, especially SunAmerica, its domestic life insurance subsidiary, SunAmerica, Benmosche said, “look at the positive flows we've had; enormous flows.”
He also said that AIG has purchased some of the sub-prime securities collateralized by reserves held by its life insurance subsidiaries and sold to the Federal Reserve Board in 2008 to gain cash to deal with its problems.
The Fed put the securities in facility known as Maiden Lane II and recently completed sale of all the securities held in the portfolio through an auction conducted by several broker-dealers.
He disclosed that AIG had “bought some of the Maiden Lane assets,” but cautioned that AIG’s purchases of Maiden Lane assets were small compared to its other purchases of mortgage-backed debts.
“A lot of people think a lion’s share of Maiden Lane II is still owned by AIG after the auctions; that is not the case. It’s a fraction of what people believe it is,” he said.
As to SunAmerica, “We're back in all distribution systems,” Benmosche said. “We are back in banks and we're still the leader in the banking system.”
He also discounted the impact of low interest rates profitability of sale of SunAmerica products.
“if you believe in the Fed and the low interest rate environment over time, people still put their money in annuities,” Benmosche said.
“They still want variable annuities with guarantees. Our challenge is to price it right, and we do price it right. Everything we do is in that 11% to 13% range on an return-on-equity basis, and we're working hard to accomplish that.
“So you'll see good pricing throughout,” Benmosche said. “We see good retention of business throughout.”
Discussing a broad range of topics, Benmosche said AIG is in the process of upgrading its worldwide accounting system, including taking a hard look at its “catastrophe load” and its reinsurance contracts.”
And, on another topic, concerns by life insurers about being designated as systemically significant, and therefore subject to regulation by the Federal Reserve Board, Benmosche voiced confidence.
“People say, are you worried about being a SIFI?” Benmosche said. “Are you worried about the Federal Reserve? No, I welcome it."
One of the opportunities AIG has that most insurance companies do not, Benmoshe said, is that with AIG, an enormous amount of money sits at the holding company, not at the regulated insurance entities. As a result, the company has enough capital to be flexible in dealing with problems at the operating level.
He said the reorganization of property and casualty subsidiary Chartis is almost complete and that AIG plans to grow Chartis “by doing more consumer business around the globe” and by continually focus on growth economies.”
In his comments, Benmosche said the company is nearing a decision on the way it will divest its leasing subsidiary, but is being cautious and will take its time in order to ensure it gets the most for this business.
Noting that the leasing subsidiary has more than $35 billion in planes on its books, “you are dealing with a big nut in here.”
He said he will determine the best way to divest the company “by doing what makes the most sense for the company, and we'll examine everything.”
At the moment, Benmosche said, “we're still focused on operating results, getting it right.
“The markets aren't quite there yet [for a decision on how the company will be divested],” Benmosche said.