AIG names new CEO, ideas to spin off lifestyle and retirement unit

(Reuters) – Insurance provider American International Group Inc AIG.N on Monday mentioned its board accredited a approach to individual the everyday living and retirement enterprise from the rest of the business, and named President Peter Zaffino as main executive officer, efficient subsequent year.

FILE Image: Banners commemorating the 100th anniversary of American International Group Inc. adorn the New York Stock Exchange in Manhattan, New York, U.S. Oct 10, 2019. REUTERS/Suzanne Barlyn/File Photo

AIG shares ended up up nearly 8% in prolonged trading.

Zaffino, 53, who succeeds 73-year-aged Brian Duperreault, will consider cost in March. Zaffino will be AIG’s seventh CEO because 2005.

The insurance provider, which ranks between the top rated 10 U.S. carriers by marketplace value, stated it has but to make a conclusion on how to have out the separation, further than the board voting to build two independent, sector-leading firms.

The separation of the business enterprise could acquire “a few of years” and may well be finished in phases by way of sales of minority stakes, in accordance to two people familiar with the subject.

The board’s selection does not rule out a single sale and any proposed transactions will also need board acceptance, AIG claimed.

The existence and retirement small business accounted for 34% of AIG’s $49 billion (37.62 billion pounds) in 2019 altered profits, compared with 64% for its common insurance coverage company, AIG claimed in September.

AIG has been in the midst of a turnaround released by Duperreault, who took cost of AIG in 2017.

Duperreault has targeted on sharpening underwriting, executing additional with worthwhile prospects, investing in technologies, restoring expertise and chopping fees.

Zaffino, has been the point guy to execute individuals aims, partly by reducing losses in the industrial residence and casualty organizations and relying additional on reinsurance whilst also modernizing technology and procedures. He also helped to recruit a amount of executives.

Zaffino joined AIG as world main operating officer in 2017. His ascension to CEO was widely envisioned right after being named president in December, but AIG had not indicated timing for the change.

AIG has struggled to appropriate itself just after a $182 billion U.S. taxpayer bailout in 2008 to save it from collapse. Given that then, the corporation has sold off significant chunks to repay the financial debt additionally a $22.7 billion return.

It also had to perform by way of significant losses from claims occurring in prior years that led to much more than $11.2 billion in unexpected reserve will increase given that 2015, most of which occurred under prior leadership.

In May possibly 2019, AIG described its to start with common insurance plan underwriting earnings because the 2008 fiscal crisis, a essential intention.

The separation of AIG’s everyday living insurance policies small business echoes a shift pushed by billionaire activist trader Carl Icahn, who focused the insurance provider in 2015 with a split-up prepare that was also supported by former hedge fund manager John Paulson.

Icahn, who preferred AIG to develop into a smaller, more simple enterprise, demanded that AIG spin off its life insurance coverage device and now former home finance loan coverage enterprise.

The move would return more hard cash to shareholders, Icahn had stated at the time.

Icahn marketed his AIG stake in 2018.

Analysts have also viewed logic in a separation. Even though the normal insurance enterprise is inclined to swings from hurricanes, wildfires and other catastrophic functions, the daily life and retirement unit’s significant investment portfolio will make it remarkably sensitive to curiosity prices – and recent low fees have dragged on earnings.

AIG also on Monday reported that it incurred an estimated $790 million in catastrophe losses throughout the 3rd quarter, net of reinsurance and in advance of tax, which includes $185 million of estimated disaster losses for statements related to COVID-19.

The losses had been broadly in line with what analysts predicted.

AIG also recorded a $9 million pre-tax charge in its lifetime insurance businesses soon after conducting and yearly evaluate of assumptions it has utilized to generate everyday living insurance coverage policies.

Reporting by Suzanne Barlyn, Alwyn Scott, Munsif Vengattil and Madhvi Pokhriyal Enhancing by Cynthia Osterman and Stephen Coates