AIG’s Hancock Says Bailout Punctured Insurer’s Hubris
American International Group Inc. (AIG), once the world’s largest insurer, benefited from the humility that came with a U.S. bailout in 2008, said the chief executive officer of the property-casualty unit.
“The crisis had a silver lining,” said Peter Hancock, CEO of the Chartis division, at a conference sponsored by Sanford C. Bernstein & Co. today in New York. “It punctured the hubris that happens in large companies that are leaders in their industry, where people think they have all the answers, and it made people open to new ways of doing things.”
Hancock has been increasing the focus on emerging markets and reducing business in segments that require the company to hold large amounts of capital as he seeks to improve returns. A former chief financial officer at a predecessor to JPMorgan Chase & Co., he was hired in 2010 to oversee risk at New York- based AIG and assigned last year to run Chartis after the unit disclosed a $4.2 billion charge because of inadequate reserves.
“It’s a business that I’d say has been managed to growth over the last 30 years,” Hancock said of Chartis. “That’s given us an edge but I think that at some point we oversaturated certain markets, and so my direction to the team is very much to recalibrate our objectives from volume to value.”
The Treasury Department took a 92 percent stake in AIG as part of a U.S. bailout that swelled to $182.3 billion. The department has cut its stake to about 61 percent through three share sales, and AIG repaid a Federal Reserve credit line that was part of the rescue.
“There was a moment where people felt that the government intervention was money going down a black hole,” Hancock said. “We had to demonstrate to the world that there really was a valuable franchise to be preserved.”
AIG has advanced 26 percent this year in New York trading.
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