By Leslie Scism and Chelsey Dulaney
American International Group Inc. said Tuesday that it is buying
First Principles Capital Management LLC and tapped the
private-investment management firm's top executive as its new
investment chief.
First Principles CEO Douglas A. Dachille will succeed William N.
Dooley, 62 years old, who is retiring after nearly 40 years with
AIG. Mr. Dachille, who is 51, will also become executive vice
president.
The move will reunite Mr. Dachille and AIG Chief Executive Peter
Hancock, who overlapped for more than a decade when working at the
company known as J.P. Morgan Chase & Co., according to a
company spokesman.
In 1991, Mr. Dachille started a hybrid derivatives unit within
the group that Mr. Hancock was running.
After leaving J.P. Morgan, Mr. Dachille formed a partnership
with Mr. Hancock and Roberto Mendoza, another alumnus of the bank,
and Nobel Prize winner Robert Merton to buy Gen Re Securities from
Berkshire Hathaway Inc. But the parties couldn't agree on terms,
and Mr. Dachille left the partnership to join Zurich Capital
Markets, where he was president.
In 2003, Mr. Dachille helped found First Principles, which he
has led for the past 11 years.
First Principles, a fixed-income investment manager with about
$10 billion in assets under management, serves clients, including
endowments and pension plans.
The acquisition of First Principles marks a return for AIG into
the business of managing money for outside investors, a business it
exited in the wake of its near collapse during the financial
crisis. An AIG spokesman said the company "has no plans to further
develop a third-party business."
Before its 2008 bailout, AIG's then-named AIG Investments
managed money on behalf of AIG's own insurance units as well as
other large investors, such as pension funds. In 2008, it invested
$565 billion of insurance funds for the insurance units, and $110
billion for external clients.
AIG's near collapse resulted partly from an effort by AIG
Investments to juice profits, with the insurance units heavily
exposed to subprime mortgage bonds. Losses mounted when the
real-estate bubble burst.
Those bad investments aren't as well known a contributor to
AIG's woes as are the company's massive sales of a type of
unregulated bond insurance--known as credit-default swaps--to
protect Wall Street firms, banks and other big clients from losses
on their mortgage bonds.
AIG's former CEO, the late Robert Benmosche, sold the
third-party investment-management business in 2010 as one of many
divestitures to help AIG fully repay its bailout package.
The First Principles acquisition is expected to close in the
third quarter of the year. First Principles will operate as a
wholly owned subsidiary of AIG. Terms of the deal weren't
disclosed.
Write to Leslie Scism at leslie.scism@wsj.com and Chelsey
Dulaney at Chelsey.Dulaney@wsj.com
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