Don’t Be Afraid Of American General!

Let’s face it. If you want to turn a few stomachs in a discussion about the recession all you have to do is throw out the name AIG, the epicenter of the current economic meltdown. AIG owns life insurance giant American General.

So, if you can control your gag reflex, should you actually consider American General as a company to apply with? I am as cautious as the next guy, but I think there are a couple of real upsides to going in that direction. Keep in mind that American General is not AIG, but rather they are owned by AIG. American General is a very respected and very profitable life insurance company, something that will bode well for AIG and all of us taxpayers as AIG begins to shed assets and start repaying debt.

My two thoughts go something like this. Historically when companies are positioning themselves for sale, their underwriting relaxes a bit. It doesn’t get sloppy, just maybe not quite as tight as a year ago. The more paying business they have on the books, the higher the value to potential suitors. With giants Met Life and AXA Equitable doing more than just sniffing around, the good news for AIG and I think for policy holders is that there are good companies out there big enough to write the checks.

The second upside is that when a company buys a block of term insurance business, by law the purchasing company has to honor all of the guarantees of the original company. Not unlike having a mortgage sold, the check may go to someone new, but the payments and contract remain the same.

Personally I think Met Life will win the day and to me that is good news for anyone that has American General life insurance. Heck, that’s a no cost upgrade since Met Life is a higher rated company than American General anyway.

Bottom line. Don’t let a knee jerk reaction to AIG spill over into passing up a good deal with American General. American General is a solid company that will end up being owned by another solid company.