An abundance of public bitterness toward A.I.G. (American International Group) in the aftermath of the financial crash of 2008 may well have attached a stigma to the “A.I.G.” label, so it’s of but little surprise that dropping the name from some of their materials has correlated with a boost in sales.
A.I.G. is one of the country’s largest financial corporations. It contributed quite noticeably to the credit crunch and then took an initial $182 billion from taxpayers under TARP (Troubled Asset Relief Program); consequently, it finds itself a wide target for antipathy and sardonic incantations of the refrain “too big to fail.”
A.I.G. has not removed its name from its very own sales materials; rather, two of its subsidiary companies, Western National Life and First SunAmerica, stopped printing the parent corporation’s name on their contracts last June. The business of these two subsidiaries has carried A.I.G. back to its place as the top seller of fixed annuities to bank customers.
The increased sales are all well and good for the banks, who earn commissions on the business; but how will A.I.G. fare? An annuity works like a loan, with A.I.G. standing in the role of debtor, a role which raises the question of whether A.I.G. shall be able to repay its debts. Already, another of A.I.G.’s subsidiaries, the American Life Insurance Company (AMLICO), overreached its capital by selling too many fixed annuities, necessitating the transfer of risk to other entities.
A related question: will A.I.G. ever pay back the taxpayers’ money? A.I.G. has been beneficiary to more than one federal loan since the onset of the credit crunch. Naturally, the investiture of the first loan created an incentive to continue assisting the company, lest it go belly up and fail to repay the loan; however, the political need to vindicate the original decision to inject public funds into the floundering company engenders an equally probable (and far more questionable) motive for continued federal assistance.
According to The New York Times, competitors believe that Western National Life’s remarkable sales are made possible by the latest infusion of money from the fed, which has allowed Western National to offer higher interest rates than anyone else in the industry.[i] If A.I.G. can duck creating a new microcosm of the global credit crunch (you may recall how government-supported financial organizations artificially inflated interest rates and contributed in large part to the unsustainable economy which fell apart in the crash of last year), then offering high interest rates on fixed annuities for the present might indeed pay off as a well-timed gambit, though that cannot come but at disruption to the rest of the financial industry (at the expense of the non-federally-assisted financial corporations).
On the other hand, it may simply be that Western National is able to make such seductive offers because it is genuinely good at what it does. Western National claims that its long and positive history with the banks that sell its products enables it to create enticing but profitable products.
[i] A.I.G. Units Omit Name and Excel (9 Dec 2009)
