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. Last Updated: 07/27/2016

DeltaCredit Signs Up With AIG Insurance

U.S. government-backed mortgage pioneer DeltaCredit Bank on Thursday announced it has signed a strategic partnership with insurance multinational AIG's Russian branch to provide life insurance for all of DeltaCredit's clients.

AIG Life general manager Alexander Zaretsky said his company would also be very interested in investing in DeltaCredit mortgage bonds, as soon as the law allows. AIG is required by law to invest in the Russian market, and mortgage bonds are the kind of high-security, long-term investment that life insurers prefer, he added.

DeltaCredit president Nikolai Shitov said that in the United States about $1 trillion is invested in mortgage bonds. Russian lawmakers have realized the bonds' potential importance and could pass the facilitating legislation as early as this year, he added.

DeltaCredit received $20 million in 1998 from the U.S.-Russia Investment Fund to start a mortgage program. The fund was set up by the U.S. Congress in 1995 with $440 million in capital to promote the development of a free-market economy in Russia.

In September, the fund reached an agreement to buy J.P. Morgan & Co.'s Russian subsidiary to allow DeltaCredit to operate as a bank. DeltaCredit had previously lent mortgages only through partner banks.

DeltaCredit estimates its share of the mortgage program could grow to 50 percent, depending on how the market develops.

The agreement with AIG, Shitov said Thursday at a news conference, would secure the professionalism of DeltaCredit's program, which is available to both foreigners and Russians.

U.S.-based AIG is the only company in Russia that has an AAA rating with Standard & Poor's, he said, and the partnership should provide clients with a price-effective and a technologically high level of service, he added. It is the No. 1 life insurance company and the No. 6 insurance company in the world, he said.

Zaretsky said 2001 sales in Russia were 250 million rubles ($8.2 million). He declined to say how much AIG's insurance would cost, but DeltaCredit said in a statement that the rate was usually less than 1.5 percent of the value of a loan.

The potential mortgage market in Moscow stands at $5 billion this year, and the national potential is $30 billion, Shitov said.

Despite doubts about DeltaCredit's mortgage program when it began operating, it has undergone rapid growth, he added. The fund now has loaned $30 million in mortgages and is reviewing mortgage applications worth $50 million, he said, adding that the average mortgage is $30,000 to $40,000.

The mortgage program has not yet had any defaulters, he said.

Until now, DeltaCredit has worked with seven insurance firms. But DeltaCredit will now move to working exclusively with AIG.

Philippe Bogdanoff, head of elite residential agency Kirsanova Realty, an affiliate of Sotheby's International Realty, said mortgage bonds would bring even more money to the real estate market, while giving investors security and more liquidity than buying land or buildings.

Michael Lange, managing director of Jones Lang LaSalle, said a number of changes were emerging in Russia that are making the real estate market appear more like Western markets.

"All this change we are going through right now will open opportunities to put more money into real estate. I'm very optimistic at seeing these steps being undertaken," he added.