AIG Hones Its Network Amid A Pullback
By Cyril Tuohy
A juggernaut has stirred.
The announcement that American General was rebranding its 1,400-strong distribution arm to American International Group Financial Network (AIG) and expanding the network’s scope will likely raise eyebrows in the corporate suites of Prudential, MetLife and Northwestern Mutual.
It’s a move that was a long time coming, some market observers said, and will breathe more life into the distribution network of the Houston-based life insurance giant. American General itself was added to the sprawling AIG umbrella in the wake of a 2001 acquisition.
For years, American General’s 1,400 advisors – mostly captive agents – ploughed through the day selling American General’s suite of protection products like life and disability insurance, but now they are going to be selling the company’s proprietary mutual funds and retirement products.
Jon Henschen, president of Henschen & Associates, a Minnesota-based recruiter of advisors to independent broker/dealers, said that when carriers boost the number of captive agents, higher sales of the company’s products will most likely follow.
“In expanding the captive force, you know you are going to have higher percent of sales increase,” he said in an interview with InsuranceNewsNet. Sales of the company’s proprietary products are “much more predictable,” since part of the commission goes directly to the carrier’s profits.
The question many distributors are asking is whether AIG will eventually sell off its independent broker/dealers as it favors the captive channel, Henschen said.
That would be unlikely, said Meyer Shields, lead AIG analyst for Keefe, Bruyette & Woods. For AIG, which bought broker/dealer Woodbury Financial Services from The Hartford Financial Services Group in December 2012, now is the time to ramp up sales, as other insurers pull back from the variable annuities market, he said in an interview.
Woodbury joined independent broker/dealers FSC Securities, Royal Alliance Associates and SagePoint Financial into AIG Life and Retirement’s network of independent broker/dealers called the Advisor Group.
John Deremo, executive vice president and chief distribution officer of life insurance with AIG Financial Distributors, said that, for the moment, 90 percent of the sales professionals in the network don’t hold a securities license.
“They will systemically, over time, have a minimum of Series 6, and many of them will have Series 7 as well as supervisory designations – Series 24,” he said in an interview with InsuranceNewsNet.
Mutual funds, managed accounts and other retirement products will be sold through the company’s broker/dealer SagePoint Financial and its SunAmerica and Western National retirement products and annuities affiliates, AIG distribution executives said.
Under the $10 million revamp, not only will AIG Financial Network producers add licensing requirements, but the producer base will expand to about 2,000 people over the next five years, Deremo said.
That should help American General plug away at the giants of the life industry: Prudential, MetLife and Northwestern Mutual. Sales forces for those life giants are changing too.
Last fall, MetLife said it would revamp its distribution system by ordering higher production levels of its two broker/dealers, MetLife Securities and New England Securities, and placing them and the company’s distributor of retirement products and services MetLife Resources, under once group called MetLife Premier Client Group.
In an interview last year, executives with Northwestern Mutual said they were looking to ramp up their sales force to about 2,500 advisors over the next 10 years.
The rebranded AIG Financial Network distribution arm will not chafe with AIG’s independent broker/dealer network Advisor Group, which is composed of independent advisors targeting clients with assets of $250,000 or more.
Nor will the rebranding AIG Financial Network overlap with distributors and financial advisors of the AIG subsidiary Variable Annuity Life Insurance, which sells into the 403(b) market, said Dan Mulé, senior vice president of AIG Financial Network.
AIG Financial Network serves only two masters, he also said: the consumer and the financial advisors who serve those retail consumers. With baby boomers retiring in droves, and many not necessarily well prepared for retirement, the challenges are “best solved face to face,” Mulé said.
“In order to understand AIG Financial Network, you need to understand what advisors need to serve their practice. How can they best do that?” he said.
For the moment, the focus is on integrating the distribution of retirement products and services into what has heretofore been a network of life and protection distributors so that AIG speaks with one voice to multiple needs of the same customer.
“We are capitalizing on the best of AIG to build an unparalleled financial network that will solve a multitude of consumer needs,” AIG president and chief executive officer Robert H. Benmosche said in a statement.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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