AIG plans regional annuity rollout

Taiwan, India and Indonesia look ripe for fixed and variable annuity products.

AIG hopes to introduce annuity products in several Asian markets this year, subject to regulatory and market structure changes, says Peter Crewe, vice president for sales, marketing and distribution in Greater China and Southeast Asia.

Crewe is part of AIG's recently founded international retirement services group, which was arranged last year and is headed in Asia ex-Japan/Korea by Desmond Chan, managing director in Hong Kong.

The team was set up to bring together annuities, pensions and mutual funds under one roof. It follows consolidation of AIG's position in the United States as the biggest provider of fixed and variable annuities, a consequence of acquisitions of SunAmerica, an issuer of institutional spread-based products, in 1999 and life insurer American General in 2001. AIG also has a strong market share of the new variable annuity business in Japan following distribution liberalization three years ago, and is the only foreign player offering both fixed and variable annuities in that market.

The same trends that have driven the growth of annuities in the US and Japan - chiefly a rapidly greying population - are evident in other Asian markets. Keen to reproduce its successes, AIG decided to establish the international retirement services group to promote new products.

Chan was put in charge of the Asian operation, while Crewe returned six months ago from serving as AIG's country head in Brunei to handle sales and marketing. Ryan Quinn, formerly of American General, runs the group's Southeast Asian business from Hong Kong.

Since then, the group has prioritised business prospects in various countries and liased with country heads to figure out where it can introduce annuities. AIG already offers investment-linked insurance policies in India, Indonesia and Malaysia, so a basic infrastructure exists internally. But some places such as Malaysia impose currency restrictions, making investment-linked products difficult to manage. Other markets such as Indonesia lack a consumer base sophisticated enough for variable annuities, but perhaps open to fixed ones. Other considerations are whether annuities defer tax advantages in various markets, or if local capital markets are liquid enough if AIG is limited to domestic currency products.

Crewe is most excited about Taiwan, which late last year authorized funds of funds, including those with offshore funds, and it has a sufficiently educated investor base. "The stage is set for Taiwan," he says, adding AIG would like to introduce variable annuities there this year.

The hang-up is that, after other foreign players introduced variable annuities, last year the Taiwanese authorities halted such activity and began to review the market. AIG hopes the authorities, having studied the product, will allow it. AIG has an affiliate there, Nan Shan Life Insurance, with 37,000 agents, as well as bank relationships it can use to distribute variable annuities.

It is also keen to introduce fixed annuities to Indonesia, where AIG has both a freestanding operation and a tie-up with Lippo, and build up its existing unit-linked investment business in India, where it has a joint venture with the Tata Group.