New CEO seeks to make acquisitions his stamp on insurer, without oversight from the government resuming expansion
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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 26, 2017).
American International Group Inc. is shuffling its structure and top leadership ranks as the insurance giant looks to begin an expansion that is expected to include acquisitions.
Chief Executive Brian Duperreault is reorganizing the company's business lines internally with two of his recent new hires taking on more responsibility, while one of his predecessor's top lieutenants is leaving.
The moves signal a reversal of efforts by prior CEO Peter Hancock at the insurance conglomerate, as Mr. Duperreault puts his stamp on the company and positions it to start expanding again, after years of shrinkage.
Mr. Duperreault's changes also come on the heels of the company's unsuccessful push last week in Washington, D.C., to get it out from under federal supervision as a "systemically important financial institution." Discussions among regulators are expected to continue about the company.
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One of the most important ramifications of a removal of the so-called SIFI label is that it would make it easier for Mr. Duperreault to make acquisitions, without worrying about the need to obtain Federal Reserve approval for sending large amounts of capital out the door.
In the new development, Mr. Duperreault said in a release that AIG no longer would have units focused separately on commercial and consumer segments, but would transition to units that focus on type of insurance.
There will be a "general insurance" unit for the various property-casualty insurance products sold to businesses, wealthy homeowners and other clients, and a life-insurance and retirement-services unit. It also will have a stand-alone, technology-enabled insurance platform.
Two of the three heads of these units are people brought on board by Mr. Duperreault since he arrived this spring, and they hail from companies where he previously worked: Peter Zaffino, formerly an executive at Marsh & McLennan Cos., will head the general insurance unit, while Seraina Macia will run the technology unit.
Mr. Duperreault is widely credited with a successful turnaround of then-struggling insurance-brokerage and consulting firm Marsh & McLennan from 2008 to 2012. Ms. Macia worked with Mr. Duperreault at his previous CEO job at Hamilton Insurance Group.
Mr. Zaffino joined AIG last month as chief operating officer. When Mr. Duperreault announced Mr. Zaffino's hiring in July, he told employees to expect changes to the company's operating structure.
AIG's life and retirement unit will be led by Kevin Hogan, who has been running the existing consumer unit.
As a result of the structure changes, Rob Schimek, CEO of the commercial unit, will be leaving the company at the end of October. In an internal memo sent Monday morning, the 12-year veteran of AIG said he "could not be more proud of what this company has accomplished" during that period, "from navigating the financial crisis and winning back the confidence of our partners and clients, to focusing on innovations that have outpaced the market."
Meyer Shields, an analyst with Keefe, Bruyette & Woods, said in a note, "we don't think this augurs a split" of AIG into separate companies, "but we do believe it better aligns with how investors actually prefer to analyze AIG." Among factors why he doesn't see a breakup ahead: AIG has substantial deferred tax assets on its books that are best utilized with AIG as a conglomerate, and ratings firms generally see diversification as a positive so it reduces the amount of overall capital an insurer needs to hold.
Mr. Shields said the new technology-focused unit would use external data to continue AIG's use of predictive analysis to streamline underwriting for smaller property-casualty business policyholders. "We think Ms. Macia's prominent role implies that AIG will focus its M&A efforts on small domestic P&C," Mr. Shields said.
Recently, Mr. Duperreault has cited potential growth in international markets, personal-lines insurance and life insurance, as well as U.S. small business insurance.
AIG was at the center of a meltdown in global financial markets 2008 and was effectively nationalized through a government bailout that topped $180 billion. AIG fully repaid its bailout by the end of 2012 by selling off businesses and other assets to roughly halve its size. Following the repayment and the exit of U.S. taxpayers as owner of AIG, a federal panel of regulators designated AIG as a SIFI.
Those divestitures hurt AIG's profit-making abilities, because it had sold crown jewels and lacked scale in many of the countries where it still operated. Investments in technology also had lagged behind. With its profitability in recent years trailing behind those of its peers, some activist investors, including Carl Icahn, have called for the insurance conglomerate to split itself apart.
Over the past two years, Mr. Hancock focused on continued narrowing of AIG's operations as a way to improve its profit margins. He also focused on returning billions of dollars in capital back to shareholders through dividends and share repurchases, which boosted earnings per share. When Mr. Hancock's turnaround stumbled early this year, the board sought to replace him.
The company said its year-end financial reports will reflect the new structure.
Cara Lombardo contributed to this article.
Corrections & Amplifications Rob Schimek, CEO of AIG's commercial unit, said in an internal memo Monday "I could not be more proud of what this company has accomplished over the past 12 years, from navigating the financial crisis and winning back the confidence of our partners and clients, to focusing on innovations that have outpaced the market." An earlier version of the story incorrectly changed the quote.
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(END) Dow Jones Newswires
September 26, 2017 02:47 ET (06:47 GMT)