Chartis Reorganization Draws Positive Reviews

The reorganization of Chartis, including a new management team, is a positive step forward for the company as it continues to distance itself from the tarnished image of American International Group, industry observers said.

Chartis, AIG's flagship property/casualty business, said the company is reorganizing into two major global groups -- commercial and consumer -- to better serve clients.

Peter D. Hancock, who joined AIG 14 months ago as executive vice president of finance, risk and investments, has been tapped to lead Chartis as CEO. He succeeds Kristian P. Moor, a 30-year AIG veteran, who has been named vice chairman of Chartis, and will report to Hancock.

Dan Weedin, an insurance consultant with Poulsbo, Wash.-based Toro Consulting Inc., said the move continues the distancing of Chartis from AIG and its 2008 $182 billion government bailout.

"I think time has healed some of those wounds," Weedin said. "When all the AIG stuff hit, most of it had nothing to do with the insurance operations. The property/casualty piece was pretty strong, but got dragged down with the AIG name. This news is pretty positive."

AIG said Hancock has played a pivotal role with the company over the past 14 months. He was a principal designer of AIG's recapitalization plan, which led to the company repaying its outstanding obligations to the Federal Reserve Bank of New York and becoming poised to exit government ownership in its entirety. He oversaw the reorganization of the company's enterprise risk management function, as well as the completion of the de-risking of the AIG Financial Products portfolios and the integration of the legacy AIGFP portfolios into AIG Investments.

Weedin said Hancock's risk management finesse means "it's a pretty healthy transition. This is a good move. It's a healthy step forward."

AIG is aiming to "reorganize to make themselves more effective," said Christopher A. Brassard, executive vice president with Ten Eyck Group. Ten years ago, AIG was such a sprawling entity that sometimes brokers didn't know where to go to place business. "Because they are so broad and their reach so expansive, it was hard to navigate. They've gotten better at that," Brassard said.

"I have no doubt AIG/Chartis will be a major player for a long time to come," said Jason Beans, CEO of Rising Medical Solutions. "They have weathered the worst of the storm and an organization as large and established as AIG/Chartis will now be able to build upon its already vast and solid infrastructure."

The government still owns 92.1% of AIG's shares. In February, AIG announced it would post a $4.2 billion fourth-quarter charge as it strengthens loss reserves for Chartis' long-tail property/casualty business (BestWire, Feb. 9, 2011).

"The AIG brand is so well-known and powerful, the only logical conclusion for the Chartis rebrand is to distance itself from the reputation post the bailout," Beans said in an email. "The P&C market also has a long tail and Chartis has had to increase reserves on old claims recently so the distancing may be bidirectional to allow AIG stock to be sold at a higher price without the P&C concerns to investors."

The reorganization represents a "big change for Chartis I think that will serve our clients better," Hancock told BestWeek. "It also optimizes our allocation of financial capital and capacity and human capital around the best opportunities."

Robert H. Benmosche, president and CEO of parent company AIG, told BestWeek the company isn't out of the shadow of the 2008 financial crisis and government bailout that saved the company from potential ruin, but a "new" AIG is emerging.

"Having stabilized the company, [and having been] able to get our restructuring so taxpayers are paid back what they provided to AIG, now it is building the new AIG going forward," Benmosche said.

"We see ourselves now as a diversified group of very strong insurance companies," Benmosche said. "The various companies, in my mind, represent an appropriate diversification of risk. We're not all in property and casualty, worried about earthquakes and hurricanes. We have a life insurance business that deals with mortality. We have an annuity business that worries about equity markets and interest rates as well as mortality. We think the diversification gives us a strong investment-grade footprint on a go-forward basis."

In other appointments related to the reorganization, John Q. Doyle, previously CEO of Chartis U.S., will run the global commercial business, and Jeffrey L. Hayman, currently Chartis' chief administrative officer, will lead the global consumer business.

Doyle and Hayman will be responsible for their groups' overall underwriting and business results and will report to Hancock.

In addition, Nicholas C. Walsh, previously president and CEO of Chartis International, will lead global distribution, reporting to Hancock. The global distribution organization will support the commercial and consumer groups by focusing on clients' needs and working with underwriting and claims to deliver global and local insurance solutions to them.

Chartis will include four principal regions: U.S./Canada, led by Peter J. Eastwood, currently president of Lexington Insurance Co.; Europe, led by Alexander R. Baugh; Far East, led by Jose A. Hernandez; and Growth Economies, led by Julio A. Portalatin.

Chartis U.S. Insurance Group currently has a Best's Financial Strength Ratings of A (Excellent).

To listen to the full interview with Robert H. Benmosche and Peter D. Hancock, visit http://www.ambest.com/media/media.asp?RC=184909

(By Meg Green, senior associate editor, BestWeek: [email protected])