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Experts: Changes Wont Rock

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AIG Life And Annuity Units


Most analysts and producers agreed on the strength and resilience of AIGs mammoth life and annuity units in interviews conducted shortly after AIG said Maurice Greenberg had been replaced as CEO.

Some other analysts, however, say they are nervous about what other surprises might surface.

Moodys Investors Service, New York, notes in its comment on the news, for example, that it made its decision to change the outlook on its AAA rating for AIG to negative, from stable, “based on information disclosed by AIG thus far.”

But Andrew Kligerman, an analyst at UBS Investment Research, New York, a firm that has done business with AIG, scoffs at the idea that AIG might break up or go through any other changes that would have a noticeable, long-term effect on the life and annuity units. “The company has performed exceedingly well,” Kligerman says.

In the short term, “there may be some noise,” says Julie Burke, a managing director at Fitch Ratings, Chicago, a firm that has lowered its long-term rating on AIG to AA-plus, from AA. “But were not really expecting any long-term changes.”

Like Kligerman, Burke rejects the idea of an AIG breakup. “One of the core strengths of the company is its diversity,” she says.

In the life and annuity industry, “theres all kinds of shakeups all across the country,” says Paul Cantone, a partner at Safe Harbor Financial Inc., Philadelphia, a life and annuity distributor.

Other big life insurers have recovered from shake-ups before, and AIGs excellent products, competitive commissions and financial stability should help AIGs life and annuity operations get through the current shake-up without suffering any noticeable harm, Cantone says.

Tony Bahu, CEO of AnnuityMD Inc., Livonia, Mich., a licensed life producer who has written a book that is critical of the annuity industry, says he finds AIGs life and annuity units are comparable to other life and annuity businesses when it comes to products, claims, service and producer communications.

“I dont think its only AIGs turn” to attract the scrutiny of New York Attorney General Eliot Spitzer, Bahu says. “I think theres more to come.”

One good strategy for companies affected by regulatory investigations is to organize the kind of warts-and-all producer communications campaign that Merrill Lynch & Company mounted a few years ago in response to the stock research probes, Bahu says.

Reproduced from National Underwriter Edition, March 17, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.