AIG Delays Annuity Unit Spinoff

American International Group says the recent spike in market volatility has caused it to put off separating from its Corebridge Financial life insurance and annuity unit.

The New York-based insurance giant now sees September as the “next window” for selling a large minority stake in Corebridge to the public through an initial public offering.

Earlier, AIG had suggested it would complete the IPO by June 30.

During a conference call today with securities analysts AIG’s CEO, Peter Zaffino, said that, in the second quarter, the market was simply too volatile for AIG to launch the IPO.

“While completing the IPO is a significant priority for us, and something we are laser-focused on, we believe this is an attractive business,” Zaffino said. “We did not want to execute a transaction that would be detrimental to stakeholders in the long run.”

What It Means

AIG is the second-biggest player in the U.S. individual market, with $16 billion in 2021 direct earned premiums, or 6.5% of the total, according to the National Association of Insurance Commissioners.

The IPO delay means that a major source of retirement income planning tools is facing more corporate structure uncertainty.

The delay may also provide food for thought for any clients who are thinking of selling homes or other large assets or making other large financial transactions.

If the level of volatility makes a company the size of AIG uncomfortable, the ride might be even bumpier for ordinary retail investors.

The Results

AIG held the conference call to go over earnings for the second quarter, which ended June 30.

AIG as a whole is reporting $3.4 billion in net income for the quarter on $14 billion in revenue, up from $150 million in net income on $11 billion in revenue for the second quarter of 2021.

The AIG Life and Retirement business, which will become Corebridge, is reporting $563 million in adjusted pre-tax income on $4.1 billion in total adjusted revenue, compared with $1.1 billion in adjusted pre-tax income on $5 billion in revenue for the year-earlier quarter.

Total yield on variable and indexed product investments fell to 3.69%, from 4.61% a year earlier, in spite of the effects of rising interest rates on newly invested money.

Premiums and deposits fell to $778 million, from $1.4 billion, for individual variable annuities, but increased to $1.4 billion, from $938 million, for traditional fixed annuities.

Premiums and deposits for non-variable indexed annuities continued to hover around $1.5 billion.

F&G Annuities & Life

Another big insurer, Fidelity National Financial, is planning to distribute a 15% stake in its own life and annuity unit, F&G Annuities & Life.

Executives from the Jacksonville, Florida-based company, which is best known as an issuer of title insurance, said they continue to be on track to complete the partial spinoff transaction for F&G by the end of the year.

“We see our public listing as a vote of confidence in our business while maintaining benefit from the continued partnership of FNF’s majority ownership,” Mike Nolan, FNF’s CEO, told securities analysts during FNF’s second-quarter earnings call.

In the retail market, F&G focuses on sales of fixed and non-variable indexed annuities.

Chris Blunt, F&G’s CEO, noted that F&G increased its retail sales to $2.2 billion in the second quarter, up 34% from the total for the second quarter of 2021.

F&G is reporting $128 million in adjusted net earnings for the quarter on $552 million in revenue, up from $92 million in adjusted net earnings on $439 million in revenue for the year-earlier quarter.

The unit’s adjusted yield on assets under management fell to 4.71%, on 4.97%.

Reasons

Many multiline insurers have separated from life and annuity units in recent years, in part because of concerns about the possible impact of new accounting rules for long-duration life and annuity products.

Fidelity National has said it’s planning the partial F&G IPO mainly to draw investors’ attention to how well F&G is doing.

Pictured: Peter Zaffino (Photo: AIG)