Despite strong assurances from American Insurance Group Inc. that its subsidiaries are financially sound, a number of banks say they have temporarily suspended sales of AIG annuities.
AIG, New York, has been the second leading seller of fixed annuities overall, after New York Life Insurance Company, New York.
In the bank channel, AIG’s total annuity sales were close to $2 billion in the second quarter, making it the leading annuity vendor in banks, according to Beacon Research Inc., Evanston, Ill. Many financial institutions sell AIG’s leading bank annuity under their own brand.
Recent rating downgrades may have affected AIG’s standing with banks.
Despite the fact that the Federal Reserve Bank of New York is backing AIG with an $85 billion credit facility, and assurances from AIG executives and state insurance regulators that AIG’s insurance subsidiaries are safe, some banks have discontinued sales of AIG products.
Wells Fargo Investments, a division of Wells Fargo & Company, San Francisco, says it has suspended all new sales of AIG fixed annuities, variable annuities and life insurance products, effective Sept. 16.
“That suspension of new sales is still in place,” a Wells Fargo spokeswoman said Wednesday. “We’re continuing to monitor the situation but cannot say at this time when we would expect to resume sales.”
Sun Trust Banks Inc., Atlanta, also says it has “temporarily suspended” selling AIG annuities. “We are continuing to monitor the situation closely,” a spokesman said Wednesday.
Citigroup Inc., New York, says it is continuing to sell AIG annuities through its Smith Barney brokerage unit.
Other major banks did not return calls seeking comment.
Kenneth Kehrer, a consultant who tracks bank annuity sales, says industry sources are telling him that some institutions that suspended sales of AIG subsidiaries’ annuities have started selling them again.
“Undoubtedly, AIG’s annuity sales have suffered somewhat,” says Kehrer, head of Kehrer-Limra Inc., Windsor, Conn. “It’s working with banks to reassure them the problems of the parent won’t affect the subsidiaries, which are insulated from the parent by statute.”
AIG has moved swiftly to reassure agents and advisors that its insurance and annuity subsidiaries are financially sound.
Bruce Skolnick,, president of AIG Annuity, issued a statement emphasizing that 92% of banks continue to sell its products.
“We expect all banks to reestablish sales in the future following the Fed’s action,” Skolnick says. “We understand that people have their life savings with us, and we take that very seriously. What policyholders need to understand is that we are the same company we were one week ago, one month ago, one year ago.”