Published September 19, 2008

GLOBAL FINANCIAL CRISIS
AIA loses its boss amid the storm

Mark O'Dell quits; rivals said to be eyeing AIG's assets worldwide

By GENEVIEVE CUA
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(SINGAPORE) Amid the drama surrounding its US parent, AIA Singapore yesterday announced the shock departure of its executive vice-president and general manager Mark O'Dell, who is understood to be joining another insurance firm.

Mr O'Dell: His decision to leave is not related to the recent developments at AIG but a personal decision that he has been planning for some time

AIA's US parent AIG Inc was extended a lifeline by the Federal Reserve, a loan of US$85 billion for a 24-month term. In return, the Fed will own 79.9 per cent of the ailing insurance giant. But it is clear that AIG must sell assets to repay the loan.

News articles yesterday speculated that European insurers are hoping to snap up AIG's assets in Europe and Asia. Hong Kong's AIA has denied a report of a management buyout. AIA Singapore was not specifically mentioned though it remains in the same boat as its siblings.

David Havens, credit analyst at UBS AG, told Bloomberg that AIG has 'the best Asian insurance franchise in life and general insurance of any Western company'. Companies named as possible buyers of AIG assets include Prudential, Munich Re and Allianz SE.

AIG has been hit by US$18 billion in losses arising from guarantees on mortgage derivatives. Ratings downgrades exacerbated its liquidity crunch, forcing it to raise another US$14.5 billion which it did not have.

On Mr O'Dell's departure, Mark Wilson, AIA president and regional president of AIG Life Companies (Asia-Pacific), said in a statement last night that Mr O'Dell has taken leave of absence with immediate effect.

'(Mr O'Dell's) decision to leave the company is in no way related to the recent developments at AIG. It is a personal decision that he has been planning for some time,' he said.

Kenneth Juneau, executive vice-president and senior regional life executive of AIA's regional office, will take over Mr O'Dell's portfolio in the interim 'until a statement is made on the new general manager for AIA Singapore'. Mr Juneau is an AIA veteran with more than 30 years' experience in the insurance industry.

Meanwhile, the company yesterday also said that it has rolled out a 'policy conservation programme' to enable those who had cancelled policies in the last couple of days to reinstate them at no cost or penalty.

Some 0.1 per cent of policies were cancelled in the last couple of days by policyholders worried about the possibility of insolvency. With over two million in-force policies, this works out to about 2,000 cancellations.

In the last couple of days since news broke of AIG's troubles, hundreds of policyholders had thronged AIA's office to cancel policies or to get more information.

The reinstatement programme will apply to whole life and endowment plans surrendered between Sept 15 and 19. While there will be no penalties, policyholders will need to submit evidence of insurability. Written requests for reinstatement must be received by AIA within 14 days of the date of surrender.

The policies will be reinstated in full, with no interest charged on the back premiums and cash values returned. Any dividends will be re-deposited into the policyholder's account and interest will continue to accrue from the date of reinstatement.

Mr Wilson said: 'We have received feedback that many of our customers are now more reassured of AIA Singapore's financial position and would like to continue to enjoy the insurance protection and accumulated savings that their policies offer.'

The Monetary Authority of Singapore (MAS) said: 'We are satisfied with the ability of the company to carry on business as usual and to meet new demands even when there are any changes in management.' It also said that it welcomes AIA's policy reinstatement programme and reiterated that the firm has sufficient assets to meet its liabilities to policyholders.

'Policyholders should not act hastily to terminate their insurance policies as they may suffer losses . . . and lose the insurance protection they may need,' said MAS executive director (insurance supervision) Low Kwok Mun.

The Life Insurance Association (LIA) also said that AIA policyholders 'have no cause for concern with regards to their policies'. It said that policyholders should refrain from hastily cashing in their policies 'based on unfounded fears regarding the financial health of its US based parent'.

It also warned against any poaching of AIA clients by other insurers, adding: 'The LIA takes very seriously any attempt by distributors to target AIA policyholders and advise them to surrender or replace their policies.'

Mr O'Dell was LIA president. The deputy president is Darren Thomson, Manulife chief executive.