American International Group Inc. has assigned staff from Argentina to advise their counterparts in Athens as the bailed-out insurer prepares for a possible Greek exit from the euro.
“Our Argentina team that has been successful before, during and after their currency crisis has been working with our team in Athens,” Peter Hancock, chief executive officer of the Chartis property-casualty unit, said yesterday at an investor conference in New York. “We’ve been as ready as we can.”
Financial firms, including New York-based AIG, Bank of America Corp. and Wells Fargo & Co. say they’re preparing for an escalation of Europe’s sovereign-debt crisis amid concern that Greece will exit the euro, with the common currency at its lowest against the U.S. dollar since June 2010. Argentina defaulted on a record $95 billion of debt in 2001 and later abandoned a decade-long 1-to-1 peso peg to the greenback.
“The team in Argentina has been through a number of eruptions and has had to deal with situations of extreme uncertainty and capital flight that would be not unlike what AIG will be dealing with” if Greece leaves the euro, said Clark Troy, a consultant to insurers who’s based in Chapel Hill, North Carolina. AIG is “calling attention to the fact that they have been through this before,” he said.
AIG’s “global footprint enables us to share knowledge and lessons learned across countries and lines of business,” said Jim Ankner, company spokesman.
‘Flight to Quality’
The crisis may help AIG add customers as some businesses choose the insurer over European competitors in a “flight to quality,” Hancock said during the conference sponsored by Sanford C. Bernstein & Co.
“I don’t take great joy in that,” he said. “The damage to growth in Europe and global growth of a continued crisis in the euro zone is just bad for demand in general.”
AIG hired Hancock in 2010 to oversee risk and reassigned him last year to run Chartis after the unit disclosed a $4.2 billion charge because of inadequate reserves.
The insurer, once the world’s largest, benefited from the humility that came with getting a $182.3 billion U.S. bailout during the financial crisis, Hancock said.
“The crisis had a silver lining,” he said. “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 AIG’s focus on emerging markets and cutting back in businesses that require the company to hold large amounts of capital as he seeks to improve returns.
“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,” he said.
AIG has advanced 26 percent this year to close yesterday at $29.18 in New York, the top performance in the 22-company Standard & Poor’s 500 Insurance Index, which gained 2.7 percent.