By Leslie Scism and Joann S. Lublin
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)
Copyright (c) 2017 Dow Jones & Company, Inc.
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