AIG’s high concentration in life and the US market makes it vulnerable

The US accounted for over three quarters of American International Group’s (AIG) business in 2018. This exposes it to increased claims due to the high COVID-19 death toll in the country, according to GlobalData, a leading data and analytics company.

AIG is more concentrated in one particular area than most global insurers of similar size, with 75.2% of 2018 premiums held in the US. Japan follows with the second largest market of 7.8%, which has fared comparatively well with COVID-19, compared to other major countries.

While the company does have a diverse business portfolio, life accounted for over 50% of its total premiums in 2018. This leaves it exposed to the current low interest rate and poor investment conditions.

Deblina Mitra, Insurance Analyst at GlobalData, comments: “The increase risk of global economic contraction and financial markets’ volatility, coupled with a decline in equity and asset prices, are key factors that impact AIG’s growth prospects and investment gains and operations in 2020 and beyond. Asia-Pacific accounts for around 13% of the company’s total business. Although Japan has fared relatively well with COVID-19 this could be impacted by an expected Japanese economic slowdown.

“One positive for AIG is that it engages in multiple distribution channels, including both online and offline. The pandemic has increased the focus towards new channels such as digital brokers, online claims management and distribution of policy information, intended to help limit physical interactions. This will help it conduct business throughout the rest of 2020.”

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