AIG to name Duperreault CEO: reports

AIG is set to name Brian Duperreault as its new chief executive, according to a report in the Wall Street Journal. Citing sources close to the deal, the newspaper said that Mr Duperreault and AIG are finalising his contract. News broke last month that former ACE chief Mr Duperreault was a leading contender to replace AIG’s current CEO Peter Hancock. Mr Hancock resigned in March after a series of big losses and dealing with intense pressure from activist investors Carl Icahn and John Paulson to break up the group. Mr Duperreault is currently head of Bermuda-based Hamilton Insurance Group. He previously worked for AIG as deputy to Maurice Greenberg, before taking over at rival ACE and then becoming CEO of Marsh & McLennan. His likely appointment as CEO of AIG comes as the insurer announced decent first quarter results following a tough end to 2016. AIG told analysts last week that it is on track to meet 2017 financial targets, after reporting an improved first quarter. AIG posted after-tax operating income of $1.37bn for the first quarter of 2017, compared with $765bn in the same period of 2016. The result was a vast improvement on the $3bn loss reported by AIG in the fourth quarter of last year. Speaking to analysts last week, Mr Hancock said results for the first quarter showed that AIG’s “transformative actions” are beginning to payoff. “The first quarter shows that our actions are delivering results and we see momentum across all our core businesses,” he said. Mr Hancock highlighted several areas where AIG made progress, including cost reduction, reducing its loss ratio and returning capital to shareholders. AIG achieved its two-year expense reduction target of $1.4bn nine months early, while operating expenses in the first quarter declined 10% year on year, he said. Mr Hancock also reassured analysts that actions taken during 2016 had not negatively impacted client relationships. “Client retention remains at an historical high for major accounts,” he told analysts, adding that AIG received “important feedback” from clients at this year’s RIMS conference. He also said AIG continues to attract talent despite its recent turmoil. “While discipline around expense management remains a priority, we continue to invest in our infrastructure and talent with a focus on AIG’s long-term future,” said Mr Hancock. “AIG’s talent base remains strong and employee retention rate is the same or better than the previous four years. We continue to attract top talent,” he said. The insurer also continues to invest in its multinational insurance offering. Mr Hancock is confident that AIG will meet its target of returning $25bn of capital to shareholders. The insurer has so far returned $18.1bn, including $7bn in the first quarter of 2017. However, AIG’s outgoing CEO does not believe that returning such a large amount to shareholders will endanger financial strength ratings. In January, AM Best placed the ratings of AIG under review. “We have been very clear that protecting ratings of subsidiaries is the most important objective. Our capital levels and holding company liquidity remain extremely strong when we look across our business and across our competitors,” said Mr Hancock. “Our main message is that we continue to be prudent and will return capital in consultation with regulators and ratings agencies, but given current balance sheet strength we remain optimistic on resolving our ratings outcomes over the course of the quarter,” he continued. “Engagement with the regulator and ratings agency is critical to the success of AIG and we will continue to work closely with them,” he added. Mr Hancock also noted that AIG commenced preparations for Brexit during the first quarter, which will see AIG establish a new subsidiary in Luxembourg. “Our London team has completed a thorough Brexit analysis and we announced our strategy to position us for a seamless transition in serving the European market,” he said. AIG argues that first quarter results show progress on improving its underwriting result, as it targets lower expense and loss ratios. For example, AIG is selling its stake in Lloyd’s-based Ascot Underwriting because of its high commissions and expense ratio. According to Robert Schimek, chief executive of commercial at AIG, the insurer continued to take “significant actions” in the first quarter to improve underwriting performance. The commercial loss ratio improved 1.2 percentage points to 65.5% in Q1, compared with the last quarter of 2016. AIG is targeting a loss ratio of 62% by the year-end, with a further three-point improvement expected from changes to AIG’s business mix. The quality of premium continued to improve in the first quarter, said Mr Schimek. The insurer enjoyed its sixth consecutive quarter of rate increases in excess of three points for US casualty. According to Mr Sankaran, claims trends in the first quarter were favourable and better than expected, especially for primary workers compensation and excess casualty. He also said reserves were stable with no adverse development, other than a $102m first quarter charge for changes to the Ogden rate in the UK. AIG has also reduced its catastrophe risk exposure through increased reinsurance purchasing and changes to its business mix. Consequently, net premiums in the first quarter were 14% lower at $3.6bn.

AIG to name Duperreault CEO: reports

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