A.I.G. Hasn’t Emerged From Its Lost Decade Yet

A.I.G. Hasn’t Emerged From Its Lost Decade Yet


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Anyone who has held shares in the insurer American International Group since the end of 2007 is still nursing a 95 percent stock-price loss. That’s even worse than Citigroup, its fellow crisis basket case. The insurer is finally emerging from a lost decade after receiving a controversial $182 billion government bailout in 2008. But investors remain wary.

The disaster 10 years ago centered on A.I.G.’s financial-products unit, which had sold huge amounts of supposedly not-very-risky credit protection on subprime-mortgage products. The consequences included a $62 billion loss in the final quarter of 2008.

Employees were vilified, and some critics labeled the bailout a conspiracy to help banks because it enabled A.I.G. to pay billions to trading counterparties including Goldman Sachs and European institutions like Société Générale and Deutsche Bank.

A.I.G. offloaded assets including its Asian life-insurance arm A.I.A., which has more than tripled in value since it was floated in Hong Kong in 2010. Repaying the government in full in December 2012 was a signal achievement of the then chief executive, the late Bob Benmosche.

Revenue shrank steadily under Mr. Benmosche, Peter Hancock and, since May last year, Brian Duperreault, as each successive C.E.O. fought to bring both continuing businesses and problematic legacy lines under control.

Mr. Duperreault is an industry guru and veteran of A.I.G., Ace, Marsh & McLennan and Bermuda-based Hamilton Insurance. Ask around his head office in New York, and people say he is a leader who can make the company hum again and who is assembling a stellar team.

The removal of A.I.G.’s “systemically important” designation by regulators last year was a landmark, too. A.I.G. even looks like a different company: without A.I.A., with a focus on stronger underwriting practices, and with ambitions to grow again. The company in July closed its biggest acquisition since the crisis — the $5.5 billion purchase of Validus, a Bermuda reinsurer.

Yet A.I.G. still isn’t back to profitable growth, and the company’s shares are priced at a nearly 25 percent discount to book value, far lower than most peers. Investors don’t yet accept that A.I.G.’s dismal recent past is behind it. Maybe that’s something A.I.G. can achieve in 2019, its centennial year.

Richard Beales is deputy editor of Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

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