New CEO seeks to make acquisitions his stamp on insurer, without
oversight from the government resuming expansion
By Leslie Scism
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 26, 2017).
American International Group Inc. is shuffling its structure and
top leadership ranks as the insurance giant looks to begin an
expansion that is expected to include acquisitions.
Chief Executive Brian Duperreault is reorganizing the company's
business lines internally with two of his recent new hires taking
on more responsibility, while one of his predecessor's top
lieutenants is leaving.
The moves signal a reversal of efforts by prior CEO Peter
Hancock at the insurance conglomerate, as Mr. Duperreault puts his
stamp on the company and positions it to start expanding again,
after years of shrinkage.
Mr. Duperreault's changes also come on the heels of the
company's unsuccessful push last week in Washington, D.C., to get
it out from under federal supervision as a "systemically important
financial institution." Discussions among regulators are expected
to continue about the company.
One of the most important ramifications of a removal of the
so-called SIFI label is that it would make it easier for Mr.
Duperreault to make acquisitions, without worrying about the need
to obtain Federal Reserve approval for sending large amounts of
capital out the door.
In the new development, Mr. Duperreault said in a release that
AIG no longer would have units focused separately on commercial and
consumer segments, but would transition to units that focus on type
of insurance.
There will be a "general insurance" unit for the various
property-casualty insurance products sold to businesses, wealthy
homeowners and other clients, and a life-insurance and
retirement-services unit. It also will have a stand-alone,
technology-enabled insurance platform.
Two of the three heads of these units are people brought on
board by Mr. Duperreault since he arrived this spring, and they
hail from companies where he previously worked: Peter Zaffino,
formerly an executive at Marsh & McLennan Cos., will head the
general insurance unit, while Seraina Macia will run the technology
unit.
Mr. Duperreault is widely credited with a successful turnaround
of then-struggling insurance-brokerage and consulting firm Marsh
& McLennan from 2008 to 2012. Ms. Macia worked with Mr.
Duperreault at his previous CEO job at Hamilton Insurance
Group.
Mr. Zaffino joined AIG last month as chief operating officer.
When Mr. Duperreault announced Mr. Zaffino's hiring in July, he
told employees to expect changes to the company's operating
structure.
AIG's life and retirement unit will be led by Kevin Hogan, who
has been running the existing consumer unit.
As a result of the structure changes, Rob Schimek, CEO of the
commercial unit, will be leaving the company at the end of October.
In an internal memo sent Monday morning, the 12-year veteran of AIG
said he "could not be more proud of what this company has
accomplished" during that period, "from navigating the financial
crisis and winning back the confidence of our partners and clients,
to focusing on innovations that have outpaced the market."
Meyer Shields, an analyst with Keefe, Bruyette & Woods, said
in a note, "we don't think this augurs a split" of AIG into
separate companies, "but we do believe it better aligns with how
investors actually prefer to analyze AIG." Among factors why he
doesn't see a breakup ahead: AIG has substantial deferred tax
assets on its books that are best utilized with AIG as a
conglomerate, and ratings firms generally see diversification as a
positive so it reduces the amount of overall capital an insurer
needs to hold.
Mr. Shields said the new technology-focused unit would use
external data to continue AIG's use of predictive analysis to
streamline underwriting for smaller property-casualty business
policyholders. "We think Ms. Macia's prominent role implies that
AIG will focus its M&A efforts on small domestic P&C," Mr.
Shields said.
Recently, Mr. Duperreault has cited potential growth in
international markets, personal-lines insurance and life insurance,
as well as U.S. small business insurance.
AIG was at the center of a meltdown in global financial markets
2008 and was effectively nationalized through a government bailout
that topped $180 billion. AIG fully repaid its bailout by the end
of 2012 by selling off businesses and other assets to roughly halve
its size. Following the repayment and the exit of U.S. taxpayers as
owner of AIG, a federal panel of regulators designated AIG as a
SIFI.
Those divestitures hurt AIG's profit-making abilities, because
it had sold crown jewels and lacked scale in many of the countries
where it still operated. Investments in technology also had lagged
behind. With its profitability in recent years trailing behind
those of its peers, some activist investors, including Carl Icahn,
have called for the insurance conglomerate to split itself
apart.
Over the past two years, Mr. Hancock focused on continued
narrowing of AIG's operations as a way to improve its profit
margins. He also focused on returning billions of dollars in
capital back to shareholders through dividends and share
repurchases, which boosted earnings per share. When Mr. Hancock's
turnaround stumbled early this year, the board sought to replace
him.
The company said its year-end financial reports will reflect the
new structure.
Cara Lombardo contributed to this article.
Corrections & Amplifications Rob Schimek, CEO of AIG's
commercial unit, said in an internal memo Monday "I could not be
more proud of what this company has accomplished over the past 12
years, from navigating the financial crisis and winning back the
confidence of our partners and clients, to focusing on innovations
that have outpaced the market." An earlier version of the story
incorrectly changed the quote.
Write to Leslie Scism at leslie.scism@wsj.com
(END) Dow Jones Newswires
September 26, 2017 02:47 ET (06:47 GMT)
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