AIG Names Brian Duperreault as CEO -- 4th Update

By Leslie Scism and Joann S. Lublin Features Dow Jones Newswires

American International Group Inc. on Monday named Brian Duperreault -- a onetime lieutenant to former CEO Maurice R. "Hank" Greenberg -- as the firm's new chief executive.

Continue Reading Below

Mr. Duperreault, 70 years old, is the founder and CEO of Bermuda-based Hamilton Insurance Group Ltd. Mr. Duperreault spent just over two decades at AIG before leaving to run three other companies. His résumé includes a widely praised turnaround of consulting and insurance-brokerage firm Marsh & McLennan Cos.

News of Mr. Duperreault's hiring was first reported Wednesday by The Wall Street Journal.

In returning to AIG, Mr. Duperreault will face the challenge of improving its financial results amid fierce industry competition. The insurance conglomerate has paid off a nearly $185 billion U.S. government bailout extended during the global markets meltdown of 2008, but it had to sell many businesses to repay taxpayers. AIG's profit margins have notably lagged behind many of the insurer's rivals since its near collapse.

Separately, AIG said Monday that it had agreed to acquire Hamilton's U.S. platform for an estimated price of $110 million, a move seen as deepening AIG's push into big data and analytics. AIG and Hamilton also announced a reinsurance partnership, and AIG agreed to pay Hamilton as much as $40 million for the firm releasing Mr. Duperreault from restrictive covenants that could have restricted his hiring.

The past six months have been particularly tumultuous for AIG. Just a few weeks after the firm posted disappointing fourth-quarter results, CEO Peter Hancock in March said he would resign from the insurance giant after less than three years at the helm. Many board members were unhappy about setbacks in the company's plan for boosting profitability, while several also feared a potential fight with AIG shareholder and activist investor Carl Icahn.

Continue Reading Below

Mr. Hancock agreed to stay until a successor was found.

AIG executives are carrying out a two-year strategic plan unveiled in January 2016 -- in response to pressure from Mr. Icahn. Many goals are on track to be achieved, such as cutting costs and returning $25 billion to investors through dividends and share buybacks, analysts have said.

AIG board members don't expect their new leader to change the current strategic direction at the giant insurer, the people familiar said.

In brief comments Monday at a previously planned AIG event highlighting its consumer-insurance businesses, Mr. Duperreault said, "I didn't come here to break the company up, I came here to grow it." It was an apparent reference to some activist investors' calls over the past two years for the insurance conglomerate to improve its results by splitting itself apart. Mr. Duperreault noted AIG's "tremendous commitment" to share buybacks but said capital also will be deployed to expand the company.

He said, too, that AIG's claims reserves appear reasonable, which alleviates concerns of some analysts that he might take a large charge against earnings to bolster them. Mr. Duperreault said he wants continued investments in data science to better assess insurance risks, with AIG to be "at the forefront of the industry."

While not involved in the just-completed CEO search, Mr. Icahn previously contacted Mr. Duperreault about running AIG, people familiar said. The outreach occurred around the time of Mr. Icahn's initial AIG investment, disclosed in fall 2015. After AIG's announcement, Mr. Icahn wrote on Twitter, "Very pleased the $AIG board is finally making some of the much-needed changes we've been advocating the last 18 months."

Mr. Duperreault was at AIG in the years when Mr. Greenberg was transforming it from a mediocre property-casualty insurer into a powerhouse with financial-services operations that spanned the globe. In an interview Monday, Mr. Greenberg said of Mr. Duperreault's 21 years at AIG, "obviously, that was a great foundation." He has the experience needed "to make changes to improve [AIG's] results. I wish him the best of luck." said Mr. Greenberg, 92, who now runs insurance and investments conglomerate Starr Cos.

The hiring of Mr. Duperreault will mark the second time AIG has recruited a chief executive past normal retirement age. Robert Benmosche was 65 when he left retirement to run the insurer in 2009.

AIG said Mr. Duperreault will receive an annual base salary of $1.6 million, a short-term annual incentive target of $3.2 million and an annual long-term incentive award of $11.2 million.

In addition, Mr. Duperreault will receive a one-time, make-whole cash award of $12 million for unvested Hamilton equity awards forfeited with his appointment as chief executive and a one-time, sign-on award of options to purchase 1.5 million AIG shares.

The Bermuda-born Mr. Duperreault, a mathematics major at St. Joseph's University in Philadelphia, joined the insurance industry in 1973 "almost by accident," according to a speech on Hamilton's website. "I was looking for a job and saw an ad for actuaries at AIG." Just out of the U.S. Army, "I didn't know what an actuary was and didn't know anything about insurance, but I needed a job." He took one of the actuarial positions and "was hooked." He rose through the ranks to become one of its most senior executives.

As Mr. Duperreault gained authority in running operations, many industry colleagues and Wall Street analysts said he was a potential successor to his boss -- though at the time Mr. Greenberg had no intention of stepping aside. Instead, Mr. Duperreault became one of many AIG executives to depart for leadership roles elsewhere.

He left in 1994 to run ACE Ltd., a then-Bermuda-based specialty insurer with large corporate clients.

Mr. Duperreault expanded the niche company into a diversified insurer with the 1999 acquisition of Cigna Corp.'s U.S. and international property-casualty operations. The company since has acquired Chubb and is known as Chubb Ltd.

Mr. Duperreault retired from ACE in 2004 but then was recruited in 2008 to become CEO of Marsh & McLennan. The New York firm was under pressure to consider a breakup by shareholders who were frustrated with its performance. Mr. Duperreault cut costs, strengthened the management team and acquired smaller firms to bolster growth, including to better serve smaller U.S. companies, among other moves.

He left Marsh in 2012, and the following year, back in Bermuda, he established Hamilton with principals of hedge fund Two Sigma Investments. Last year, Hamilton teamed with AIG and Two Sigma on a joint venture to sell insurance online to small businesses, using advanced data analytics. Monday, the three firms announced an expansion of that partnership.

AIG also announced a plan to negotiate a contract with Two Sigma for "a next generation insurance platform for AIG's use," with the ultimate cost estimated to be about $250 million over five years. AIG already is using algorithms to issue policies to midsize and some large policyholders. That move will deepen the role of Two Sigma, one of the more successful quantitative hedge funds using computers to trawl data in the investment process, in the insurance industry as it seeks to branch out.

After both the ACE and Marsh & McLennan jobs, Mr. Duperreault retired but joked last year at an industry conference: "I'm just not very good at staying retired." In particular, in leaving his post-Marsh retirement to start Hamilton, he said he was motivated by enthusiasm for applying cutting-edge data-science techniques to the property-casualty insurance industry. "I really do believe this is one of the most exciting times to be working in this industry in the 40 years since I joined it," he said on another occasion.

--David Benoit contributed to this article.

Write to Leslie Scism at leslie.scism@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

American International Group Inc.'s new chief executive Brian Duperreault on Monday promised not to break up the insurance conglomerate.

Mr. Duperreault, a onetime lieutenant to former CEO Maurice R. "Hank" Greenberg, was officially named as AIG's leader on Monday. Mr. Duperreault will succeed Peter Hancock, who in March agreed under pressure from the board to depart.

Mr. Duperreault will take on the task of restoring AIG's profit margins after years of trailing behind many peers.

AIG's woes stem from its near collapse in the 2008 global financial crisis. By 2012, it had repaid its nearly $185 billion U.S. government bailout, but did so by selling many of its crown-jewel Asian businesses to raise cash. To avoid customer defections, it issued many insurance policies at what have turned out to be cut-rate prices, resulting in charges against earnings to bolster reserves.

Some activist investors -- including Carl Icahn -- have called for the insurance conglomerate to improve its results by splitting itself apart. That sentiment was dismissed in Mr. Duperreault's first public comments after being named CEO.

"I didn't come here to break the company up, I came here to grow it," said Mr. Duperreault at a previously planned AIG investor event highlighting its consumer-insurance businesses.

Mr. Duperreault said AIG has had a "tremendous commitment" to share buybacks and that "going forward capital will also be deployed to expand" the company.

Mr. Duperreault, 70 years old, is the founder and CEO of Bermuda-based Hamilton Insurance Group Ltd. Mr. Duperreault spent 21 years at AIG before leaving in 1994 to run three other companies. His résumé includes a turnaround of consulting and insurance-brokerage firm Marsh & McLennan Cos., and turning once-boutique ACE Ltd. into a major insurer. Last year, ACE acquired Chubb Corp., one of AIG's biggest rivals., and now is known as Chubb Ltd.

News of Mr. Duperreault's hiring was first reported Wednesday by The Wall Street Journal.

Separately, AIG said Monday it agreed to acquire Hamilton's U.S. platform for an estimated price of $110 million, a move that will deepen AIG's push into big data and analytics. AIG and Hamilton also announced a reinsurance partnership, and AIG agreed to pay Hamilton as much as $40 million, releasing Mr. Duperreault from covenants that could have restricted his hiring.

The past six months have been particularly tumultuous for AIG. The push for Mr. Hancock's exit came as many board members were unhappy about setbacks in the company's plan for boosting profitability, while several also feared a potential fight with Mr. Icahn. Mr. Hancock agreed to stay until a successor was found.

AIG executives are carrying out a two-year strategic plan unveiled in January 2016. Many goals are on track to be achieved, such as cutting costs and returning $25 billion to investors through dividends and share buybacks.

AIG board members don't expect their new leader to change the current strategic direction at the giant insurer, according to people familiar with the matter.

Even so, Evercore ISI analyst Thomas Gallagher said Mr. Duperreault's focus on growth is "a pretty dramatic change" from Mr. Hancock's shrinkage of property-casualty premium volume to avoid low-margin business.

Mr. Icahn had contacted Mr. Duperreault about running AIG around the time of his initial AIG investment, disclosed in fall 2015, people familiar said. After AIG's announcement about Mr. Duperreault, Mr. Icahn wrote on Twitter, "Very pleased the $AIG board is finally making some of the much-needed changes we've been advocating the last 18 months."

In Monday's comments, Mr. Duperreault said AIG's claims reserves appear reasonable, which alleviates concerns of some analysts that he might take a large charge.

Mr. Duperreault also said he wants continued investments in data science to better assess insurance risks, with AIG to be "at the forefront of the industry."

At Hamilton, Mr. Duperreault teamed with AIG and Two Sigma Investments on a joint venture to sell insurance online to small businesses, using advanced data analytics. Monday, the three firms announced an expansion of that partnership.

AIG also announced a plan to negotiate a contract with Two Sigma for "a next-generation insurance platform for AIG's use," with the ultimate cost estimated to be about $250 million over five years. AIG already is using algorithms to help issue policies to midsize and some large policyholders.

"This is an acceleration point," said Brian Modesitt, who leads the Two Sigma group, in an interview. "We recognize that this industry, like many, desperately needs a new approach around data science and technology infrastructure."

At AIG, Mr. Duperreault will receive a base salary of $1.6 million, a short-term annual incentive target of $3.2 million and a long-term incentive award of $11.2 million.

In addition, Mr. Duperreault will receive a one-time, make-whole cash award of $12 million for unvested Hamilton equity awards forfeited with his appointment as chief executive and a sign-on award of options to purchase 1.5 million AIG shares.

Mr. Duperreault was at AIG in the years when Mr. Greenberg was transforming the company into a powerhouse with financial-services operations that spanned the globe.

In an interview Monday, Mr. Greenberg said of Mr. Duperreault's 21 years at AIG, "obviously, that was a great foundation." Mr. Greenberg added that Mr. Duperreault has the experience needed "to make changes to improve [AIG's] results."

Mr. Greenberg, 92 years old, now runs insurance and investments conglomerate Starr Cos.

--David Benoit and Bradley Hope contributed to this article.

Write to Leslie Scism at leslie.scism@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

(END) Dow Jones Newswires

May 15, 2017 18:50 ET (22:50 GMT)