American International Group Inc., the 98-year-old insurer and retirement planner, is finding being tech-savvy pays off.
Consumers are pumping cash into a unit that oversees $244 billion in client assets after it invested in digital platforms to make the process easier, according to division head Kevin Hogan.
"We believe our assets are up billions of dollars as a result," Hogan said last month at AIG's New York headquarters, referring to digital services created for clients such as teachers and hospitals. The unit, called Valic, has set up a record number of investment plans this year, he said.
The market for digital advice is likely to grow to $1 trillion by 2020, according to a recent study by Aite Group. Under Chief Executive Officer Brian Duperreault, AIG has focused on tech to streamline operations and forged a relationship with hedge fund firm Two Sigma Investments to work on deals with small- to middle-size businesses.
Hogan leads the life and retirement business, a bright spot at the New York-based company that has struggled with years of surprise costs at its commercial unit. The unit's pretax operating income jumped 33 percent in the second quarter. AIG last week restructured its business operations, including moving the personal insurance unit into a segment overseen by new executive Peter Zaffino. Duperreault said the change would allow for "the greatest competitive advantage and ability to serve our clients."
Valic has expanded to more than $99.2 billion in client assets, up from about $95.2 billion at the end of last year, while the individual retirement unit had almost $144.8 billion as of June 30. Valic has more than 1,000 financial advisers and joined with startup firm RetireUp to use new software in March.
Hogan's team spent 18 months creating digital services for Valic. He is seeking new ways to use artificial intelligence, data and analytics, and has been working with algorithms behind robo-advising platforms to cater to specific clients in the individual retirement business. Rivals such as century-old TIAA, which is known for catering to teachers, have started online advisers.
Robo advisers began popping up shortly after the financial crisis as startups offered lower fees for digital platforms with trading and portfolio services tied to algorithms. At first, Wall Street ignored them, but then large asset managers such as Charles Schwab Corp. and Vanguard Group Inc. joined the industry and added robo advisers of their own.
As the millennial generation ages, many of these platforms are introducing hybrid products requiring interaction between humans and computers. Betterment is the largest independent robo, with just over $10 billion in assets under management, and it recently unveiled a hybrid model. Charles Schwab and Vanguard also have hybrids.
"Robos reaffirm how big the retirement opportunity is in the U.S.," Hogan said. "An important part of our strategy is to make sure that we're at the leading edge of how to work with those organizations."
SundayMonday Business on 10/01/2017