AIG chairman backs departing CEO’s plans
American International Group (AIG) chairman Doub Steenland has reaffirmed board support for the course charted by CEO Peter Hancock, even though Hancock said he was quitting because of insufficient investor backing.
In his annual letter on Monday, Steenland said the insurer’s board stood behind Hancock’s two-year goal of returning $25bn to shareholders.
He agreed with Hancock that it would be a mistake to break AIG up, rebuffing a plan punted by activist investors Carl Icahn and John Paulson.
Icahn’s firm named a representative to the board last year.
“The board and management team believe strongly that we are on the right strategic path,” Steenland said, referring to a review on whether to split consumer and commercial insurance into two firms. “Analysis showed this to be value destructive. This analysis still stands.”
Steenland said the board was looking for the “right individual” to be CEO. He is trying to assure investors, customers and staff of the group’s stability as it seeks its seventh CEO since 2005.
UBS Group said on Monday that a review of job-search website Glassdoor showed that the morale of AIG employees was lower than that at rival groups.
AIG has gained just 1.4% in New York trading since October 27 2015, the day before Icahn disclosed a stake and urged Hancock to split the group. That compares with the 22% rally for the S&P 500 financials index.
Hancock posted four losses in the past six quarters, pressured by higher-than-expected claims costs on policies written years earlier. He said on March 9 he would step down when the board found a replacement and it would be a distraction if he stayed on “without wholehearted shareholder support”.
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Hancock and others said a split would jeopardise the group’s credit ratings and squander the advantage of providing multiple products. He said in 2016 he would return $25bn to shareholders by end-2017 with buybacks and dividends.
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Hancock focused on selling smaller units, such as a mortgage guarantor and a Lloyd’s of London operation while cutting jobs. This approach won peace for a while with billionaire Icahn, but he praised the board on the day Hancock said he was leaving.
Amid warnings on mixed board signals, Barclays analyst Jay Gelb said lack of a designated successor suggested there might not be board consensus on the next CEO’s approach.
“We believe that not having a new CEO in place probably means the strategy and financial targets could be under review,” said Gelb.