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Time to Get Back to Selling, Says AIG Unit President/CEO Wintrob

Source: WSJ

Posted on 20 Jan 2011

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Jay Wintrob, president and chief executive of life insurer SunAmerica Financial Group, which now generates roughly half the core earnings of the slimmed-down AIG, "says his business has arrived at the starting line.

"We were in the doghouse … but now, there are no excuses," says Mr. Wintrob. "All we've ever asked for is a level playing field, and we're getting that opportunity again. This is just the beginning."


On Jan. 14, AIG repaid its debt to the Federal Reserve Bank of New York, ending active government support and positioning the Treasury Department to exit the company and recoup a $47.5 billion investment by selling a 92.1% ownership stake.


To get investors to buy Treasury's shares in the coming months, AIG has to show that its remaining insurance businesses, which also include a global property-and-casualty insurer called Chartis, can consistently show a profit and grow. Reflecting investor skepticism, AIG`s share price has fallen 11% this month to $51.02 at Wednesday's close.


SunAmerica Financial, a collection of companies that sell life insurance, investments and retirement-income products to individuals across the U.S., was rocked in the wake of the AIG bailout and lost business to competitors without reputation issues. More than a dozen big banks and brokerages suspended sales of the company's annuities while AIG was struggling. Most have since reinstated selling arrangements, but a few have yet to return.


SunAmerica has won back market share in key areas and seen a snap back in profit. But while operating earnings have been relatively stable in the past year, sales are still "down materially from pre-crisis levels," Moody's Investors Service noted last week. As SunAmerica tries to boost sales, its businesses are competing against financially stronger rivals and facing such headwinds as persistently low interest rates, which have dented investment returns and sales of certain products.


"Our challenges today are the challenges of dealing with the broader economy," Mr. Wintrob, 53 years old, said in a recent interview from his office in the Los Angeles neighborhood of Century City. "It's a competitive market, but we have a lot of momentum."


SunAmerica, once a large publicly traded company in its own right, was acquired by AIG in 1999 for $18.3 billion in stock. Mr. Wintrob, a former corporate lawyer, joined the business in 1987 and became chief in 2001 of what was known as AIG Retirement Services. The business, with headquarters in Los Angeles and Houston, operated relatively autonomously within AIG for years and was a market leader in variable annuities, whichare like mutual funds with tax advantages and insurance features.


In September 2008, the government bailout of AIG flung its domestic life and retirement businesses into turmoil. In the U.S., more than 18 million individuals held some form of SunAmerica Financial Group life insurance or retirement-savings product, and roughly 300,000 financial advisers and insurance agents were authorized to sell them. SunAmerica's hotlines were flooded by people concerned about their investments and policies. One call center received 130,000 calls in a single day, compared with the usual 5,000.


In the fourth quarter of 2008, customers surrendered a record $9.6 billion in policies and products—in effect withdrawing money they had with


SunAmerica's businesses, which had more than $220 billion in assets. The company responded with call-center scripts, letters and phone calls to customers, distributors and state insurance regulators, telling them that client money was protected from AIG's woes. Surrenders dropped sharply after that.


Shortly after the bailout, AIG put its domestic life insurance and retirement-services businesses up for sale in an attempt to repay taxpayers as quickly as possible. Some bids came in, but amid the financial crisis, "they were ridiculous lowball numbers," Mr. Wintrob recalls. However, internal preparations for a sale gave employees a sense of purpose and motivated them to work to keep the businesses intact.


Amid uncertainty about SunAmerica's ownership, 16 big distributors of its annuities, including units of Wells Fargo & Co., Merrill Lynch & Co. and M&T Bank, stopped sales. A big blow came in February 2009, when Edward Jones, a St. Louis brokerage whose nationwide network of financial advisers once generated more than a third of SunAmerica's variable annuity sales, halted new sales.


A spokesman for Edward Jones says the suspension was due to concerns about AIG's financial condition and how that could impact SunAmerica's ability to honor long-term commitments to the brokerage's clients.


Throughout the crisis, Mr. Wintrob traveled extensively to meet representatives of the banks and brokerages. "Look, we're financially strong and stable," he told them. "Don't confuse our life companies with what you're reading about AIG's challenges." But the distributors wanted to see signs of a recovery and clarify SunAmerica's ownership before they would return.


In the second quarter of 2009, following a bonus controversy at AIG and a ratings downgrade at its life companies, SunAmerica's sales hit a low point.


By then, plans to sell the businesses hadn't panned out, and Mr. Wintrob was told to instead prepare them for a separation from AIG via a spinoff or initial public offering. SunAmerica and its units jettisoned AIG's name and reverted to brands they were formerly known by, such as Western National Life and Valic.


In August 2009, Robert Benmosche joined AIG as CEO. He decided AIG's businesses needed to be rebuilt if the company was to have a chance of repaying taxpayers in full.


"Your priority is to retain the business we have, motivate your people, get clients to stay and get back into the distribution channels," Mr. Benmosche told Mr. Wintrob at their first meeting. Together, the two executives went to meet the banks and brokerages. That summer, AIG combined its American General life-insurance business with SunAmerica's units, positioning an expanded SunAmerica Financial Group as a core business.


Over time, and as negative publicity and public anger around the bailout subsided, sales improved. Stephen Maginn, chief distribution officer for SunAmerica variable annuities and mutual funds, says that when he met with clients and financial advisers, "initially they were surprised to see us. But when we kept showing up, people began saying that at some point they would do business with us."


SunAmerica's units re-established sales arrangements with 13 large businesses that earlier suspended sales, including M&T Bank and Bank of America's Merrill Lynch arm, their spokesmen confirmed. To better compete with rivals, the businesses launched new products and resumed spending on training seminars for independent agents and advisers.


Three distributors haven't lifted suspensions for certain products: Edward Jones, Wells Fargo and SunTrust Banks Inc. In recent weeks, SunAmerica representatives have been in contact with Edward Jones, which is assessing the situation in light of last week's development. Spokesmen for Wells Fargo and SunTrust declined comment.


After posting losses in late 2008 and early 2009, SunAmerica reported core operating earnings of $3.2 billion for the first nine months of 2010.


Overall sales are about a third below precrisis levels, but third-quarter sales of variable annuities more than tripled from the same period a year earlier and life insurance sales rose significantly. The group's Western National unit, meanwhile, held on to its top ranking in market share in selling fixed annuities through banks for a 14th consecutive year.


Some independent financial advisers still aren't fully on board. After AIG's near-collapse, Christopher Mitchell, a Milwaukee, Wis., financial planner, says he spent hours advising clients who already held SunAmerica annuities that their money was protected, but is hesitant to initiate new sales. "It's the negative connotation of the bailout," says the 33-year-old, who oversees $50 million in client assets. "Unless SunAmerica really has the best products,


I'd rather not associate myself with AIG." Mr. Mitchell says he may change his mind if taxpayers are fully repaid.