By Jane Han
Staff Reporter
There is a lot of work cut out for Brad Bennett, newly appointed CEO of AIG's general insurance unit in Korea, when he joins the wobbling operation here in three weeks time. Rocked by the ripple effects of the U.S. financial storm that nearly toppled its global headquarters, the domestic business is struggling to get a grip on its next direction.
The $85 billion U.S. federal bailout to rescue the insurance giant last month not only threw the local unit in a frenzy to retain anxious policyholders, but it made it much tougher for financial advisors to sign on new clients.
``Existing policyholders have calmed a bit, but sealing new contracts has become almost impossible because of the lingering fears,'' said one advisor of five years, who is getting ready to move to a local insurer.
According to industry sources, one week of policy cancellations totaled 150 billion won last month when the bailout news first surfaced.
AIG Korea's life and non-life insurers says it will focus on rallying back to former earning levels and restore dented consumer confidence.
However, observers are pessimistic about a speedy recovery, saying that the instability will in fact spill over to other foreign insurance firms that are suffering from worsening performances.
Global insurance powerhouses such as MetLife and Prudential have spooked investors after reporting or hinting at heavy third-quarters losses. MetLife said last week that its third-quarter profit fell as much as 48 percent, while Prudential said it expects to see profits fall sharply.
The shaky status of these insurers, which boast a solid presence here, is starting to concern domestic customers that they will see another AIG.
``Consumers have lost trust in these big name foreign overseas companies,'' said Lim Hae-jin, a researcher at the Korea Consumer Agency, ``and because the global financial turmoil is seeing no end now, anxiety is only growing.''
Market experts says that foreign insurers' latest slip will possibly turn the tide of the local insurance industry, which has largely opened itself to overseas firms since the 1997 Asian Financial Crisis.
Non-Korean insurers have taken up more than a 20 percent market share over the past 10 years, thanks to wide sales networks and a variety of products.
``This will be an opportunity for domestic insurers to expand their presence,'' said Chang Hyo-sun, an analyst at Samsung Securities.