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AIG — Struggles, a Plan & a Controversy

Posted By Administration, Tuesday, August 8, 2017

Financially, AIG continues to struggle. The firm’s new CEO Brian Duperreault cut company costs by $404 million in the second quarter. That is a 15.6% drop to $2.2 billion. The after-tax operating income in the same quarter came in at $1.4 billion which is up a bit from 2016’s figure of $1.3 billion.

That’s kind of good news but the second quarter also had AIG taking another hit. Pre-tax operating income fell from $941 million in 2016 to $716 million — a huge drop. Higher property losses are to blame as is a 15% decline in net written premiums for commercial insurance.

Duperreault said it’s all because of not-so-favorable market conditions or something like that. “We will build on AIG’s strong franchise by maximizing the value of our international footprint, which distinguishes us from many of our competitors. While market conditions remain challenging, we are committed to disciplined underwriting and are focused on investing in profitable growth,” he said.

These stats came out at the second quarter investment call.

In the same call Duperreault said a current emphasis of the company is convincing the industry that AIG is — again — a great place to work. It comes in light of the financial cuts and from a talent exit the company experienced during its most difficult times.

“I heard many concerns about talent before I arrived. There is no question AIG lost talent, but it was also blessed with a strong bench. The job now is to rebuild that bench. We are regaining our positions as the best company to work for in our industry. I am going to take full advantage of that as a net acquirer of talent,” he said.

The company is also looking — after a long time in the shedding mode — to acquire assets. The expansion of commercial business will center on the in the process of acquisition Hamilton USA.

“We will look for acquisitions of complementary areas. We will consider opportunities that are additives with respect to diversification and balance they bring to our portfolio and capabilities, [as well as] future profitable growth. I am going to be primarily looking for strategic balance that gives us ways to deploy capital [for acquisitions] when the things we do have had issues,” Duperreault said.

And the acquisitions will include large companies and small. “I wouldn’t mind doing both, but if you’re playing odds, you have a better chance of doing a series of acquisitions than one large one,” he said.”

In the meantime, controversy continues to follow AIG. Democrat Sen. Elizabeth Warren of Massachusetts and Rhode Island Sen. Sheldon Whitehouse are concerned and they’re asking AIG questions and demanding answers.

Of concern is the relationship between billionaire and AIG investor Carl Icahn — who is a special advisor to President Donald Trump — and his relationship with AIG. Icahn also served on the board of directors for a short time where he pushed former AIG head Peter Hancock to divest itself of parts of the company to get out from under the systemically important financial institution (SIFI) designation.

That didn’t happen so the worry of Warren and Whitehouse is that he’s now taking a different approach.

Treasury Secretary Steve Mnuchin heads the Financial Stability Oversight Council (FSOC) and it gave AIG the designation. Both sent a letter to Mnuchin and wondered if Icahn is using his influence — via his connection to the president — to get AIG’s SIFI designation overturned.

Given Mr. Icahn’s recent modification of his position on the breakup of AIG, and his past interactions with administration officials, we write to seek assurances that Mr. Icahn has not provided input on or received information on the pending FSOC decision on AIG’s SIFI status,” the two wrote.

Warren and Whitehouse also want assurances that individuals with a financial stake in a business are not unduly influencing the president or the FSOC.

 

Source links: Insurance Business America, Carrier Management — link 1, link 2

Tags:  a Plan & a Controversy  AIG — Struggles  Insurance Content  Insurance Industry  Insurance News  Weekly Industry News 

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