Subsidiary hit by AIG slide

Frank, an insurance agent with AIA (China), used to emphasize his company's membership in AIG as a selling point to potential clients. But since the financial crisis he has been downplaying the connection as much as possible, removing all mention of AIG from his business cards.

When prospective customers ask about the relationship between the two firms, Frank stresses AIA's origins as a separate entity in Shanghai 90 years ago.

AIG was badly burned by a financial product unit's foray into mortgage investments, which brought the company close to bankruptcy before it was rescued by a $180 billion US-government bailout.

Frank is not the only one in his company trying to distance the firm from AIG; Hong Kong's landmark 185-metre AIG tower is also reportedly about to swap AIG for AIA in its official name.

But despite efforts by AIA and other subsidiary firm under the AIG umbrella to protect their brand names, AIG's collapse is affecting their business in China.

According to statistics from the China Insurance Regulatory Commission, AIA's premium income in January was 617 million yuan, down from 4.96 billion yuan in January 2008. AIA held 16.1 percent of the foreign-funded and joint venture life insurance market this January. It held 21.5 percent last January.

AIA was long the top foreign insurer in terms of monthly premium income but, in February, lost this spot to Generali-China Life Insurance Co, a joint venture between Assicurazioni Generali S.p.A. and China National Petroleum Corporation.

"The drop in premium income in the first two months was partly due to the company not launching investment-oriented products with single premiums like its counterparts did," said Chen Rongsheng, president of AIA (China) in China Business News .

But AIA China's business maintained a three-digit growth rate last year, he said.

Chen Lixiao, a manager with AIU's Beijing branch, is also preparing to change his business card and the company's brochure, dropping all hint of AIG.

"The company will be probably renamed as AIU Holdings, in keeping with a name that has long been used by AIG outside of the United States but we are still waiting for the final version from the headquarters," said Chen.

But to Chen's surprise, some clients are showing increased confidence in AIU products and services, despite AIG's slide.

"A number of our clients who originally had no idea of the size of AIG and AIU now recognize that AIU has been the largest non-life insurer in the world," he said.

"Since AIU attaches a lot of importance to localization, the crisis of AIG will not affect AIU so much here," he said.

Statistics show that by the end of 2008, the solvency of AIU China stood at 801 percent.

AIG's property-casualty businesses contributed around half of the company's total of $83.5 billion in premiums in 2008. But the general insurance operation saw net written premiums decline 22 percent in the fourth quarter and the company warned that it was seeing fewer new customers and had lost existing business, partly because of concerns over AIG's financial strength.

AIG is considering spinning off its non-life insurance arm - which includes its US commercial insurance business and international foreign general division - with a view to eventually floating the company in a public offering.

AIG Chief Executive Edward Liddy said in late April that an initial public offering of at least part of the company could be staged as soon as the first or second quarter of 2010.

The proposed share sale of AIU Holdings Inc is planned for some time in the next 12 to 15 months, said Leslie Mouat, a director of the unit's Southeast Asia division according to the Hong Kong-based Oriental Daily.

Under a best-case scenario, an IPO of the business could be worth as much as $58 billion, according to an estimate from Bernstein Research analyst Todd Bault.

(China Daily 05/11/2009 page4)