Chartis’ Moor Maps Out 20% Sale, Other Steps in Separating from AIG

By | July 27, 2009

Bailed-out insurer American International Group Inc. rebranded its property/ casualty business under the name Chartis Monday and said it would put the equity for the division into a separate company — key steps toward a sale of at least part of the business.

A special-purpose vehicle formed by AIG will consist of Chartis’ North American commercial insurance units, foreign general insurance, and private client group.

“This is a significant milestone, as it sets up the legal structure” for Chartis to operate independently, Kristian Moor, the newly named CEO of the property/ casualty business, told Reuters in an interview.

The Chartis name replaces the property/ casualty companies’ previous branding as “AIG” or “AIU,” the name long used by these businesses outside the United States.

Plans are also afoot to replace the AIG sign removed months ago from the front of the property/ casualty division’s New York headquarters with the Chartis name, and new compass logo.

Chartis is building on plans first announced in March that distance itself from parent company AIG, after it lost more than $99 billion in 2008. Chartis, in contrast, was profitable, earning more than $2 billion.

NEXT STEPS

Chartis plans to sell a stake of up to 20 percent in either an initial public offering or in transactions with private investors, cutting AIG’s ownership, Moor said.

The offering could raise billions of dollars for AIG, helping it to repay the U.S. government, which has committed up to $180 billion in aid, including about $85 billion in loans.

But there are a few hurdles to leap first.

The company needs its own board of directors, something it expects will be in place by year end, said Moor, who was previously president of the division and retains that title.

It also must choose bankers to represent it in an IPO or private offering, Moor added, and will likely do so in the next few months.

Chartis will also have to unwind or formalize agreements for services that AIG provides to some of its operations. “We will either do the services ourselves or we could have a shared services agreement with AIG,” said Moor.

He added that the timing of the stake sale, likely next year, will depend on market conditions.

The company plans to remain based in its waterfront headquarters in lower Manhattan, and in an initial public offering would most likely list its shares in New York.

Chartis, which employs about 34,000 worldwide, may need to hire additional staff before a stake sale and plans to add rather than lay off people, said Moor.

STRONG POSITION

Chartis is undertaking the painful process of separating from AIG after a long history together. The property/ casualty business has been in operation since 1919, as a predecessor company to modern-day AIG and a keystone of the insurer’s claim to global dominance.

AIG, once the world’s biggest insurer, nearly collapsed last year because of credit default swaps entered into by its financial products unit. These left the insurer on the hook for billions of dollars of payouts to counterparties.

Moor wants to make it clear that the property/casualty businesses remain financially strong. He says the company has no debt, and its operations have not needed the support of federal funding.

Chief Financial Officer Robert Schimek added that the company was “very well capitalized,” with regulatory capital exceeding $32 billion at the end of 2008. Its operations are not in need of outside capital, he added.

The company, long known globally as AIU, chose the name “Chartis,” the Greek word for map, to underscore its worldwide reach, with operations in 160 countries and jurisdictions serving more than 40 million customers.

AIG shares were up 49 cents, or 3.9 percent, at $12.95 in afternoon trading on the New York Stock Exchange. The shares have fallen 97 percent in the last year, taking into account a recent 1-for-20 reverse stock split.

(Reporting by Lilla Zuill, additional reporting by Jonathan Stempel; editing by John Wallace, Gerald E. McCormick and Matthew Lewis)

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