Hoping to overcome distributors' suspicions and gain traction in the variable-annuity market, embattled insurance carrier AIG next month will introduce two VA benefit riders from a subsidiary that took its tainted name off the stationery.
But it may take more than a name change for people to ignore the parent company's past.
Just a little over a year ago, the federal government threw American International Group Inc. a lifeline as credit default swaps issued by its financial-products unit threatened to sink the world's largest insurance company.
AIG became a poster child for the financial crisis following reports that it was paying employees big bonuses and sending them on lavish junkets after the company received a $180 billion taxpayer bailout.
With the passage of time, however, AIG is hoping it can get back in agents' good graces. On Jan. 19, it will release a pair of lifetime guaranteed minimum withdrawal benefit riders under the name SunAmerica Annuity and Life Assurance Co., the new name of the well-known AIG SunAmerica. The riders are for its Polaris Platinum III variable annuity.
The name change strikes a balance between keeping the positive familiarity of the SunAmerica name while eliminating the negative association, said Bernd Schmitt, a professor of Business at Columbia Business School.
Still, “it will take some time to erase the negative association in the consumers' minds,” he said.
The name change “completes the re-branding process we began earlier this year and more closely aligns the life company name with our variable-annuity brand: "SunAmerica, The Retirement Specialist,'” SunAmerica spokeswoman Linda Skolnick wrote in an e-mail.
For advisers, however, selling the products poses a dilemma because many will likely feel obliged to make sure that their clients are aware of their affiliation with AIG.
And that could make for a tough sell.
“Given the air that AIG has had, the name would skunk the deal,” said Stuart J. Pastrich, an adviser at Compass Financial Group of Long Island, which has $100 million in assets. “But if you remove it, you're not doing what you should be doing.”
Other advisers said that they are in no hurry to sell SunAmerica annuities — and not because of the affiliation with AIG. Some think that AIG annuities historically have been expensive, with less-than-impressive investment options.
“[The new product] would have to be established and competitively positioned so that it's better than the current crop of products out there,” said Stephen F. Lovell, an adviser at Forsyth Heritage. He said that he has never sold an AIG product, because he thinks that the offerings were “middle-of-the-pack.”
The new guaranteed minimum withdrawal benefits, will charge a maximum of 2.2% for a single-life policy.
The Lifetime Income Plus product allows a 6% withdrawal for such a policy, while the Retirement Income Builder product allows 5.5%.
Fee increases for both riders are tied to the movement of the Chicago Board Options Exchange Volatility Index but are limited to a maximum hike of 25 basis points per year.
Observers don't expect AIG to pay a commission beyond the typical 3% to 7% range as a way to drum up business.
“You can't have extra incentives to get people to sell, and broker-dealers won't accept a commissions special,” said Scott Stolz, president of Planning Corporation of America Inc., the insurance general agency of Raymond James Financial Inc., which is bringing back the SunAmerica annuities to its platform next month after a 17-month hiatus.
AIG hasn't yet discussed the commissions with the broker-dealer, he said.
The AIG connection creates a distraction for clients, but the bottom line should be the health of the insurance unit and its products, said Garth A. Bernard, president and chief executive of Sharper Financial Group LLC, a consulting firm that specializes in marketing and developing retirement products.
“If you bought an annuity be-cause I connected it to AIG and it was in fact a weak insurance company with improperly funded re-serves, then that would be an ethical issue,” he said. “[But] the company has significant reserves to maintain strong ratings.”
Currently, SunAmerica Annuity and Life is rated A+ by Standard and Poor's, A1 by Moody's Investors Service, A by A.M. Best Co. Inc. and A- by Fitch Ratings Ltd.
AIG has some experience with name changes.
On the fixed-annuity side, experts think that AIG's switch from AIG Annuity Insurance Co. to Western National Life Insurance Co. was a contributing factor in its success in the bank channel. The company was the channel's top seller of fixed annuities during the third quarter, coming out of third place to beat rivals such as New York Life Insurance Co.
But Western National's success is more closely tied to the competitive bonuses that it offers consumers, as well as competitors' tapering off of fixed-annuity sales after reaching annual sales limits, said Judith Alexander, director of sales and marketing at Beacon Research Publications Inc.
Email Darla Mercado at -dmercado@investmentnews.com.
