With an $18 billion deal to buy SunAmerica, the insurance giant American International Group is poised to become a player in the red-hot U.S. retirement savings market.

The deal, unveiled Thursday and expected to close by March 31, would add one of the fastest-growing financial services companies in America to New York-based AIG's stable of insurance companies.

SunAmerica, based in Los Angeles, has boosted its earnings by an average of 34% a year since 1990 as investors have clamored for its core product- tax-deferred variable annuities.

For its part, SunAmerica gains a corporate parent with the distribution network to help it reach the rapidly growing ranks of retirement savers overseas. Though SunAmerica is chiefly a domestic company, AIG operates in 130 countries and derives more than half of its profits from outside the United States.

"AIG is the emperor of financial services in the Far East," said Eli Broad, SunAmerica's founder and chairman, in an interview Thursday. "This gives us a multiyear head start versus doing it on our own."

At a time when banks are scrambling for a piece of the booming market for retirement savings, industry observers said, SunAmerica might be viewed as the one that got away. Indeed, Mr. Broad said he has been approached in the past by bank suitors.

"This deal says that consumer savings is not just a play for banks and big securities companies," said Richard Hartnack, vice chairman of Unionbancal Corp., the San Francisco company mostly owned by Bank of Tokyo- Mitsubishi Ltd. "There are some large and very capable insurance companies that are also interested in building a presence in this market."

In pursuing SunAmerica, AIG, led by chairman Maurice "Hank" Greenberg, was seeking to fill in a gap in a product line that consists mostly of life and property/casualty insurance. Variable annuities-tax-deferred investment products that Americans are using to buttress their conventional retirement accounts-fit the bill.

"The risk of living too long is the major financial consideration for Americans," said Paul Newsome, an analyst with CIBC Oppenheimer. "AIG has that reputation for thinking long term and wanting to be in long-term businesses."

According to terms of the stock-swap transaction, each SunAmerica share will be exchanged for a 0.855 share of AIG. That would value SunAmerica at $80.90 a share, a 26% premium over its Wednesday closing price.

The proposed deal would be treated as a pooling of interests for accounting purposes, and would be a tax-free reorganization. Only one larger sale-Berkshire-Hathaway's $22 billion deal to acquire General Re-has been proposed in the insurance industry,

Though AIG is a powerful name in insurance sales, with $30.6 billion in revenues in 1997 and business operations in 130 countries, the deal calls for SunAmerica's brand name and corporate structure to survive intact.

Mr. Broad, 65, an executive who made his name in home building before erecting a retirement savings business in the 1980s, will stay on as chairman and chief executive of SunAmerica.

He said he was attracted by cultural similarities between Mr. Greenberg's company and his own. "We both think of ourselves as owner- operators instead of being just paid managers."

Both he and his second-in-command, Jay Wintrob, are expected to be elected to AIG's board of directors, according to a statement issued by AIG. No layoffs at the company are expected, Mr. Wintrob said in an interview.

"It's important to keep the SunAmerica team together," said Charlotte A. Chamberlain, an analyst with Jefferies & Co., a Los Angeles securities firm. "The idea of trashing that and sticking an AIG sign on it would have made no sense at all."

Indeed, AIG has allowed other acquisitions to maintain a fair degree of autonomy, including International Lease Finance Corp., an aircraft leasing company which coincidentally is headquartered in the same Century City office building as SunAmerica.

Referring to SunAmerica's annual earnings growth of over 30% a year, Mr. Wintrob said that "AIG feels that if it's ain't broke, don't fix it."

During an interview with the American Banker earlier this year, Mr. Broad said that he wasn't interested in bidders that were willing to talk only about the big premiums to share price they planned to offer.

But AIG's international capabilities clinched the deal for Mr. Broad.

"He wanted to grow the business internationally, and the key was to join up with someone with a distribution network in place or go it alone," said Ms. Chamberlain. "And going it alone would be tough on earnings."

In addition, Mr. Broad was attracted by AIG's triple-A credit rating, which will allow SunAmerica to significantly reduce its cost of funds, Mr. Wintrob said.

In addition to acquiring SunAmerica's variable annuities underwriting capabilities, AIG will also benefit from the company's control of its own retail shelf space. In recent years SunAmerica has built the fifth-largest brokerage sales force in the country, with 9,400 registered representatives.

Mr. Broad said he and Mr. Greenberg began talking in earnest three weeks ago about merging their companies. They have known each other about eight years, he said.

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