This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.nytimes.com/2017/03/09/business/dealbook/aigs-chief-executive-to-resign-after-turnaround-setback.html

The article has changed 5 times. There is an RSS feed of changes available.

Version 1 Version 2
A.I.G.’s Chief Executive to Resign After Turnaround Setback A.I.G.’s Chief Executive to Resign After Turnaround Setback
(about 9 hours later)
A little over a year after staving off calls by activist investors to break up the American International Group, Peter D. Hancock, the insurance giant’s chief executive, said on Thursday that he would resign after investors had lost faith in his efforts to turn around the company. Nearly nine years after the insurance giant American International Group peered into the abyss of the global financial crisis, the latest in a long line of new chief executives will try to return it to its pre-crisis heights.
Last month, the insurer reported a fourth-quarter loss of $3.04 billion — one of its worst quarters since the 2008 financial crisis and a major setback in Mr. Hancock’s efforts to reshape the company. Peter D. Hancock, the current chief executive, said on Thursday that he would resign after shareholders had lost faith in his two-and-half-year effort to turn the company around. A.I.G. said Mr. Hancock, 58, would stay until a successor had been chosen in a “comprehensive” search by its board.
As part of a transition plan, A.I.G. said on Thursday that Mr. Hancock would remain as chief executive until a successor was chosen after a “comprehensive” search by its board. His resignation announcement followed a quarterly loss of $3.04 billion that surprised investors last month. He is the fifth chief executive since Maurice R. Greenberg was forced out in 2005.
The announcement came just over a year after Mr. Hancock unveiled a plan to simplify A.I.G. and reduce its costs and risk following a monthslong dispute with the activist investor Carl C. Icahn and others, who had called for a breakup of the company. Like his more recent predecessors, Mr. Hancock, a former J.P. Morgan banker, has wrestled with trying to streamline the sprawling colossus, which spent years repaying a federal bailout. Yet he also has had to deal with pressure from another, more immediate, source: activist investors.
In a message on Twitter on Thursday, Mr. Icahn said, “We fully support the actions taken today by the board of $AIG.” Mr. Icahn is the company’s fifth-largest shareholder, with a stake of 4.7 percent as of the year end, according to Bloomberg data. In a rare tilt at a financial giant, the billionaire Carl C. Icahn publicly called in 2015 for A.I.G. to be split up and to get new leadership.
In late morning trading on Thursday, shares of A.I.G. were up about 0.6 percent. Mr. Icahn and John Paulson, another hedge fund billionaire, later ended their threat of a proxy fight after the company gave up two seats on its board last year. They supported Mr. Hancock’s less radical alternative to a breakup that was unveiled in January 2016: sell assets, cut costs and jettison less profitable insurance policies.
“I believe this is the right decision to make for the company and all its stakeholders,” Mr. Hancock said in a news release. “Without wholehearted shareholder support for my continued leadership, a protracted period of uncertainty could undermine the progress we have made and damage the interests of our policyholders, employees, regulators, debtholders, and shareholders.” Now, the two investors will have a say in what comes next at A.I.G.
Mr. Hancock, a longtime J.P. Morgan executive and former vice chairman of KeyCorp, was named chief executive of A.I.G. in September 2014 after previously heading the company’s property-casualty arm. He joined the insurance company in 2010 as executive vice president for finance, risk and investments. In a message on Twitter on Thursday, Mr. Icahn said, “We fully support the actions taken today by the board of $AIG.” Mr. Icahn is the fifth-largest shareholder, with a nearly 4.7 percent stake, according to Bloomberg data.
He is the fifth chief executive to head the insurer since Maurice R. Greenberg resigned from the company in 2005 amid an investigation into its accounting by the New York attorney general at the time, Eliot Spitzer, and the Securities and Exchange Commission. After a 12-year court battle with the attorney general’s office, Mr. Greenberg and the insurer’s former chief financial officer, Howard I. Smith, agreed to a $9.9 million settlement last month. A representative for Mr. Paulson did not respond to a request for comment. Paulson & Company has sold nearly half of its stake, and owns about 0.49 percent of the A.I.G.
Mr. Greenberg, who is known as Hank, had built the company into a global insurance goliath over four decades. Shares of A.I.G., which is based in New York, rose in early trading Thursday, but ended the day down nearly 0.4 percent, to $63.21. For the year, the shares are down 3.2 percent.
But at the height of the 2008 financial crisis, A.I.G. teetered on the brink of collapse and had to be rescued in a $185 billion bailout by the federal government. A.I.G. was once the gold standard for insurance companies, as it expanded through acquisitions engineered by Mr. Greenberg, its longtime leader. But in September 2008, with Mr. Greenberg gone, A.I.G. nearly collapsed and it received a $185 billion government bailout. In recent years, A.I.G.’s performance has lagged its peers, despite efforts by Mr. Hancock to simplify the company and trim costs.
The company is one of three nonbank financial giants to be designated as systemically important financial institutions by the federal government. (The others are MetLife, which is in a legal battle to have that designation lifted, and Prudential Financial.) That “too big to fail” label means higher capital requirements and stricter oversight, although those are expected to be loosened under the Trump administration. Investors have been frustrated by the slow pace of recovery at A.I.G., but they were rattled last month by the quarterly loss of $3.04 billion, which was larger than expected. The loss was largely a result of a $5.6 billion increase in reserves to cover potential claims. Shares of A.I.G. tumbled 9 percent the day after the results were announced.
Mr. Hancock replaced Robert H. Benmosche, a former MetLife chairman who came out of retirement in 2009 to head the insurer. Mr. Benmosche died two years ago. Despite Mr. Hancock’s impending departure, Douglas M. Steenland, the company’s chairman, said on Thursday that the board believed that the chief executive’s two-year strategic plan announced last year was “the right plan” for the company and that it remained committed to financial targets and objectives announced earlier. “Peter’s accomplishments at A.I.G., including his role in the company’s turnaround and in driving shareholder value, are immeasurable,” Mr. Steenland said.
“Peter’s accomplishments at A.I.G., including his role in the company’s turnaround and in driving shareholder value, are immeasurable,” Douglas M. Steenland, the company’s chairman, said. “He tackled the company’s most complex issues, including the repayment of A.I.G.’s obligations to the U.S. Treasury in full and with a profit, and is leaving A.I.G. as a strong, focused and profitable insurance company.” Mr. Hancock said in a statement: “I believe this is the right decision to make for the company and all its stakeholders. Without wholehearted shareholder support for my continued leadership, a protracted period of uncertainty could undermine the progress we have made and damage the interests of our policyholders, employees, regulators, debtholders and shareholders.”
To repay the government, A.I.G. sold dozens of businesses and other assets, cut its size in half and narrowed its focus, but that was not enough for some investors. The cost of claims is showing signs of inching up throughout the insurance industry. But A.I.G. has done worse than its competitors, analysts said.
In October 2015, Mr. Icahn wrote an open letter to A.I.G., urging the company to sell or spin off additional assets and focus on becoming a property-and-casualty insurer. Mr. Icahn and John Paulson, the hedge fund manager, ended their threat of a proxy fight after the insurer gave up two seats on its board last year. “A lot of work still needs to be done to sustainably improve A.I.G.’s returns, in our view,” Brian Meredith, a UBS analyst, said in a research note on Thursday.
A.I.G. chose a less severe plan to turn around its operations by selling assets, cutting costs and jettisoning less profitabe insurance policies. A.I.G. sold some of its most profitable businesses in the years after its bailout to repay the government, which it did in 2012.
But the insurer reported a large loss for the fourth quarter and was forced to bolster its reserves by $5.6 billion. A.I.G.’s shares declined 9 percent the day after its results were announced. And, it faced a brain drain as underwriters and others left after its two crises, said Meyer Shields, an insurance analyst with Keefe, Bruyette & Woods. First, investigations by Eliot Spitzer, the New York attorney general at the time, and the Securities and Exchange Commission led Mr. Greenberg to resign in 2005. And a little more than three years later, the company nearly collapsed.
Despite Mr. Hancock’s impending departure, Mr. Steenland said the board believed that his two-year strategic plan announced last year was “the right plan” for the company and that it remained committed to financial targets and objectives previously announced. “You’ve had enormous talent outflow from A.I.G. to competitors,” Mr. Shields said. “A.I.G., in the past, may have been the only place where certain large complicated risk could go for insurance. That skill set has been enormously fragmented, and I don’t think you can get all of those feathers back in the pillowcase again.”
The announcement on Thursday was a reversal for an executive who had been one of the brightest lights in finance. A banker for nearly 20 years at what was then J.P. Morgan, Mr. Hancock made his name helping to establish the bank’s global derivatives group.
He was an Oxford graduate and “the intellectual godfather” of a team of bankers who helped revolutionize finance in the 1990s, according to “Fool’s Gold,” a 2009 book by Gillian Tett.
Among his team’s innovations was the credit default swap, contracts that put A.I.G. on the brink in September 2008. At the time, the company had credit default swaps covering some $440 billion in securities on its books.
Mr. Hancock, who also was J.P. Morgan’s chief financial officer and chief risk officer, left the company in 2000 after its merger with Chase Manhattan Bank.
He joined A.I.G. in 2010 as executive vice president for finance, risk and investments and later ran its property-and-casualty arm.
In 2014, he was appointed to succeed Robert H. Benmosche, a former MetLife chairman who came out of retirement in 2009 to lead the insurer. Mr. Benmosche died two years ago.
It is not clear who may succeed Mr. Hancock as chief executive. Industry analysts said executives who might be considered include:
· Gregory C. Case, the chief executive of Aon;
· Brian Duperreault, the chief executive of Hamilton Insurance Group and former top executive at the professional services firm Marsh & McLennan Companies;
· Daniel S. Glaser, the chief executive of Marsh & McLennan;
· Constantine Iordanou, the chief executive of the specialty insurer and reinsurer Arch Capital Group;
· Michael S. McGavick, the chief executive of the insurer and reinsurer XL Group;
· Steve McGill, the former president of Aon;
· Thomas F. Motamed, the former chief executive of CNA Financial Corporation;
· Peter Zaffino, the chief executive of the insurance broker and risk manager Marsh, which is part of Marsh & McLennan.