AIG eyes expansion of life and retirement unit
June 7, 2018 by Staff
AIG’s chief executive has said he would do another multibillion-dollar acquisition “in a heartbeat” if he could find the right target, as he eyes potential expansion of the US insurer’s life and retirement business overseas.
Brian Duperreault signalled he was prepared to do more deals after he agreed this year to buy Validus, a Bermuda-based reinsurer, for $5.6bn. “If I could find another one like that I’d do it in a heartbeat,” he said in an interview with the Financial Times.
The remarks underscore the change in direction at AIG under Mr Duperreault, whose predecessors shrank the company after its $185bn bailout in the financial crisis.
AIG remains a powerhouse in US life and commercial insurance and has a chunky presence in some other countries including Japan and the UK. However, Mr Duperreault said of the group’s footprint: “If I could expand it and go into other places where it makes sense I would do that.”
The insurer’s life division has performed far better than its property and casualty business, where a series of reserving charges and muted profitability have undermined investor confidence.
Life and retirement, run by Kevin Hogan, provides a wide range of products for employers and individuals from annuities to mutual funds. It accounted for about a third of AIG’s revenues last year and produced $3.8bn in adjusted pre-tax profits, compared with a $813m loss in general insurance.
It’s very, very difficult to start up a life company . . . so I would say our preference would be to find a company that’s already there
Mr Hogan is due to present his plans for the life and retirement business to investors on Thursday at a meeting in New York, where growth opportunities will be on the agenda.
Mr Duperreault also said in the interview that the division was “very localised” in the US and he saw an opportunity to expand into other markets, given the global pressures caused by increased life expectancy.
“The US is not alone in this — the demographics are not great around the world yet we are not able to deploy that expertise anywhere else. So we’ll be ready to be able to do that.
“It’s very, very difficult to start up a life company . . . so I would say our preference would be to find a company that’s already there.”
Another acquisition could encounter investor scepticism. Shares in AIG have fallen 12 per cent since it struck the Validus deal in January.
Some shareholders are unhappy that the deal is being funded with funds that might otherwise have been used for share buybacks. There are also wider concerns about the pace of AIG’s turnround.
Mr Duperreault said he was asked by investors “all the time” about capital returns and that “sometimes buying back the shares is the best use of capital”.
But he added: “A company should have a growth strategy, otherwise you’re a shrinking company and that probably isn’t going to work out well for you at the end of the day.”
