The U.S. credit crisis has claimed its first Canadian victim: AIG Life of Canada. At the time this issue went to press, American International Group (AIG) had announced its intention to sell its Canadian subsidiary.
In a letter dated Oct. 3 and obtained by The Insurance Journal, Peter McCarthy, president and CEO of AIG Life Canada, asked financial advisors dealing with the insurance company to remind clients that policies with the company are secure.AIG is selling its Canadian subsidiary to help toward reimbursing its debt of $85 billion from the U.S. Federal Reserve. In his letter, Mr. McCarthy sought to put a positive spin on the sale.
"The fact that AIG Life of Canada, along with U.S. based AIG American General Life companies, will likely be sold indicates the tremendous value of AIG’s North American company franchise. Our company has a rich history and a strong management team. We offer a potential buyer broad and competitive product platforms, and extensive distribution and customer relationships," he stated.
Mr. McCarthy maintained that he does not know who the potential buyers of AIG Life of Canada may be, but he added that only large companies would be able to acquire the subsidiary. "The only companies who would make the investment required to purchase the U.S. based AIG American General Life companies, including AIG Life of Canada, are well capitalized with a willingness to pay in a competitive bidding environment," he explained.
Identifying a buyer and completing the transaction could take time, according to Mr. McCarthy. "In the meantime, we will stay focused and continue doing what we do best. AIG Life of Canada remains a strong, stable and financially sound company that will become part of a larger and stronger competitor in the insurance business. So you can therefore buy AIG insurance with confidence," he said.
Mr. McCarthy concluded his letter by stating that AIG Life of Canada operates only in Canada, that it is regulated by the Office of the Superintendent of Financial Institutions, and that it is a separate legal entity from AIG. "AIG Life of Canada has no investments in sub-prime mortgages in the United States, nor any investments in Canadian commercial paper. AIG Life of Canada’s financial strength ratings remain competitive and continue to represent the company’s strong ability to meet its financial obligations to policyholders," he said.
A.M. Best gave AIG Life Canada a rating of "A" (Excellent); however, it did place this rating under review. At the time of press, AIG Life Canada’s rating with A.M. Best was still "A" but with a negative outlook. Standard & Poor’s gave AIG Life of Canada a rating of "A+" (Strong), but it has given this rating a developing outlook.
As of June 30, 2008, AIG Life Canada had declared assets of $3.2 billion. Stockholder and policyholder equity totalled $411.6 million, while the company’s total revenue for the first six months of 2008 was $571.4 million. Its net income for the first six month-period of the year totalled $29.8 million.