American International Group has disclosed significant leadership changes as well as plans to separate its Life & Retirement business into an independent company.
Peter Zaffino, currently AIG’s president and chief operating officer, will become its next CEO as of March 1, 2021. He’s also taking on a director role, effective immediately.
Current CEO Brian Duperreault will continue with the company as executive chairman, and he’ll take on that new role also on March 1. With this change, Douglas Steenland, currently Independent chairman of the board, will become Lead Independent Director.
The leadership transition was widely expected. When Duperreault became AIG president and CEO in 2017, he brought on Zaffino – then the Marsh CEO- as executive vice president and global chief operating officer. Zaffino later took on the title of president from Duperreault, and has played an increasingly prominent role during AIG’s quarterly earnings calls with analysts. Both worked closely together at Marsh parent Marsh & McLennan Cos. when Duperreault ran the operation from 2008 through 2012.
AIG under Duperreault’s leadership has been able to improve its operations, particularly the fortunes of its General Insurance, or property/casualty business. Duperreault, in turn, credits Zaffino with playing a crucial role in the process. He said in prepared remarks that Zaffino “has been instrumental in the significant turnaround and transformation at AIG and his vision, determination and pursuit of excellence will help ensure the company’s future success.”
Zaffino said in prepared remarks that he is looking forward to leading AIG’s “next phase” on its way “to becoming a top performing company.”
Goodbye to Life & Retirement
Alongside the Zaffino announcement, AIG said it would separate the insurer’s Life & Health business into its own entity.
AIG in its announcement stressed that “no decisions have been made as to how to achieve a full separation,” but the company plans to do so “in a way that maximizes shareholder value and establishes two independent, market leading companies.”
Duperreault said that the decision to pursue a separation of its Life & Retirement business is an outgrowth of the last three years, during which AIG has “taken significant action to de-risk AIG and position the company for profitable growth, including fortifying General Insurance, diversifying Life & Retirement, significantly strengthening AIG’s capital and liquidity position, and building a world-class team. ”
Zaffino said that separating Life & Retirement from AIG will continue that improvement process, and “will enable each entity to achieve a more appropriate and sustainable valuation.”
The issue of whether to downsize AIG is not exactly new.
Billionaire investor Carl Icahn pushed AIG heavily to shrink itself when he was a shareholder before Duperreault’s arrival, and threatened a proxy fight with management over the issue. Specifically, Icahn wanted AIG to split into three companies, offering property/casualty insurance, life insurance and a third backing mortgages.
Any action to separate the Life & Retirement business is pending various conditions and approvals, including approval by the AIG Board of Directors, receipt of insurance and other required regulatory approvals, and satisfaction of any applicable requirements of the Securities and Exchange Commission, AIG said.
Keefe, Bruyette & Woods (KBW) analyst Meyer Shields said that while there is “no assurance” about form, timing, terms or “that a separation will in fact occur,” he does think the proposal signals material confidence in AIG’s post- separation P/C insurance prospects, where results have been significantly challenged.
The life and retirement revenues were 34% of AIG’s overall $49 billion in 2019 revenue; with 64% being from its general insurance business, according to the company’s annual report.
In 2016 AIG did downsize somewhat by selling off its advisor group and part of United Guaranty Corp., its mortgage insurer.
Changes Amid High Catastrophe Losses
AIG announced its leadership and Life & Retirement plans along with a third disclosure concerning its 2020 property/casualty third quarter catastrophe losses.
Those losses from AIG’s General Insurance arm hit $790 million pretax, including $185 million from COVID-19-related claims due to its travel, event cancellation, trade credit, property, agriculture and casualty books of business. The rest came from windstorms and tropical storms in the Americas and Japan, along with wildfires on the U.S. west coast.
Duppereault said AIG has faced a limited impact from those losses, due to its “underwriting discipline, reinsurance programs, revamped risk appetite” and its balance sheet.
AIG plans to report its 2020 third quarter results after the market closes on Nov. 5, 2020. Its quarterly earnings call will be on Friday, Nov. 6, 2020, starting at 8 a.m.
Republished from Carrier Management, the publication for the property/casualty C-suite.
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