Duperreault has no plans to split AIG with focus on balancing P&C book

AIG’s new CEO Brian Duperreault has categorically stated that he has no plans to break up the company and believes reserving levels at the troubled insurer appear “reasonable”. Mr Duperreault also stressed that rebalancing AIG’s commercial property/casualty portfolio and disciplined underwriting are priorities in difficult market conditions, as he seeks to deliver growth. Addressing investors, AIG’s new CEO, president and director also suggested that the insurer may alter its recent heavy focus on returning capital to shareholders in favour of using funds to pursue both organic and inorganic opportunities, or acquisitions. In his first comments since taking control of AIG this week, Mr Duperreault wasted no time in addressing the question on everyone’s lips. He made clear that he does believe that breaking up AIG, as his predecessor Peter Hancock resisted under pressure from activist shareholders, is the way forward. “I am very happy to be back at AIG as CEO and I look forward to making AIG better than it has ever been. In that regard, I recognise the value of the company’s multiline structure. I didn’t come here to break the company up, I came here to grow it,” said Mr Duperreault. Activist AIG shareholders, including Carl Icahn, have argued that the insurer should be split up to avoid Systemically Important Financial Institution (SIFI) classification. The Financial Stability Oversight Council has deemed AIG a non-bank SIFI, subjecting the company to Federal Reserve oversight and increased capital requirements because of its size and interconnectivity. Attempts to split AIG were resisted by previous CEO Mr Hancock, and he instead set about a turnaround plan that included selling off some AIG business units and returning $25bn of capital to shareholders. Mr Duperreault’s comments suggest he may change tack, with more focus on using funds to drive opportunities, including potential acquisitions. “This company has met its tremendous commitments to return capital to shareholders. Going forward, capital will also be deployed to expand and grow our businesses with the goal of building long-term shareholder value,” he said. Mr Duperreault added that AIG has the substance in its business and people to pursue “organic growth and inorganic growth opportunities”. The new CEO also stressed that underwriting discipline and a reshaped commercial business in tough market conditions are priorities. “Underwriting discipline and more balanced commercial businesses are keys to positioning AIG to deliver more sustainable underwriting profits. Growth combined with underwriting discipline is the path to outperforming our peers. My priority to drive AIG drives my capital management philosophy,” said Mr Duperreault. He added: “As you know, the very tough commercial markets create a challenge for our commercial property casualty business. Through the right combination of underwriting discipline, diversification and growth we will build a more balanced commercial business that can deliver consistent underwriting profits. The improvement of commercial business will be judged by the growth in our bottom line. Growth in profitability and book value are the measures of success in our business. “Financial targets are important in the management of the company, but they have to be put in balance. I am not going to emphasise one over the other. Loss ratios are important, but so is the mix of business and level of expenses,” said Mr Duperreault. So, although readers of CRE can expect a tough stance from AIG as it delivers underwriting discipline, the fact that Mr Duperreault is targeting organic and non-organic growth suggests he is happy to move into areas where he thinks he can add value to AIG and its clients. AIG’s new CEO also said that balance sheet strength is crucial. He told investors that AIG’s reserves “appear reasonable” following his initial review. AIG reported a large fourth quarter and full year 2016 loss, after taking a $5.6bn pre-tax charge for adverse prior year reserve development in its commercial property and casualty business in Q4. In a bid to stabilise its commercial business, AIG announced a retroactive reinsurance agreement with Berkshire Hathaway subsidiary National Indemnity Company. Mr Duperreault seems to believe these reserving problems are now under control. He also said that technology and innovation will be central to his plans for AIG. This can already be seen in the SME market, where the insurer this week signed a memorandum of understanding between AIG, Hamilton Insurance Group and Two Sigma Insurance Quantified, to expand their partnership to deliver a “data-driven evolution in underwriting”. “Those of you who are familiar with my track record, I don’t think will be surprised to hear my priorities will include a commitment to technology and a focus on growth, accompanied by underwriting discipline. Technology is essential to long-term success across [all] industries and the insurance industry is no exception,” said Mr Duperreault. “I see technology, data analytics and innovation as transforming the delivery of underwriting of insurance and these initiatives will put AIG at the forefront of the industry.”

Duperreault has no plans to split AIG with focus on balancing P&C book

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