Financially-challenged insurance giant American International Group is “doing very well in the marketplace” despite contrary rumors and competitors trying to take advantage of its financial situation and it intends to emerge from the current crisis “smaller and more nimble” but still “formidable,” according to Chief Executive Officer Edward M. Liddy.
Liddy said the company is concentrating on retaining current insurance customers and is “making good progress” at that. He cited good retention in its directors and officers insurance line in particular.
But he said the company would not cut prices to keep customers. “We will maintain our underwriting and pricing discipline. AIG is really good at that,” he said.
He said he had instructed AIG employees to maintain this marketplace discipline. “I don’t want to solve one problem by creating another,” he said.
According to Liddy, there was an initial period of concern among policyholders when the Federal Reserve Bank first stepped in with what he called its $85 billion “lifeline” but that “things have stabilized” since then.
AIG said it had drawn $61 billion on the Fed credit facility as of Sept. 30, 2008, with most of it going to shore up its securities lending and financial product operations.
Liddy was speaking during a conference call today with the investment community on its plans to sell off assets.
In selling off assets to pay back the federal government’s $85 billon loan, Liddy said the company would sell some life insurance and financial product units but would retain its U.S. commercial lines property/casualty business and its foreign general insurance. Its personal lines business will be put up for sale, except for its private client operations, which it intends to hold onto.
He said the sales process must be flexible. “If we get more, we will sell less,” he said. But he said he is confident the company will be able to pay back the $85 billion loan from proceeds of the sales.
He said he would prefer that the sales of AIG assets be made in large transactions with “brand name” companies with strong ratings.
Liddy acknowledged that retaining quality employees in the current environment is a challenge. He said he hoped that indicating which units might be sold or kept would help employees. “Certainty is better than uncertainty,” he said.
Also, he said the emphasis on selling subsidiaries to brand name companies is “critical” and hoped employees would take note. “There is every reason to wait and see who these buyers are,” he said.
The company has various retention and severance packages to keep employees, he added.
“This is a very strong company and we will emerge from this crisis,” he said, promising it will emerge with a structure and financing that “fit the fight going forward.”
A webcast of the AIG investor conference is available at www.aigwebcast.com.
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