AIG Names Brian Duperreault as CEO -- 5th Update

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

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

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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.

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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)