American International Group Inc. (AIG:US) plans to rebuild life-insurance sales outside the U.S. after divesting operations in Asia and Europe to help repay a taxpayer bailout, Chief Executive Officer Robert Benmosche said.
“We’re going to put a concerted effort to start re- establishing AIG throughout the world with our life-insurance products,” Benmosche told Bloomberg Television’s Betty Liu on the “In the Loop” program yesterday in New York, where the company is based.
Benmosche, 68, is expanding AIG after repaying the U.S. rescue last year, partly with funds raised by selling assets including Hong Kong-based AIA Group Ltd. (1299) and units from Canada to Taiwan. AIG is working with People’s Insurance Co., the Chinese carrier, to expand in cities including Beijing and Shanghai after announcing in November it would take a $500 million stake in the company.
AIG gained 3.1 percent to $38.45 yesterday in New York, after posting fourth-quarter results (AIG:US) on Feb. 21 that beat analysts’ estimates. Operating profit, which excludes a cost of more than $4 billion tied to discontinued operations, was 20 cents a share. That beat the average estimate for a loss of 8 cents in a Bloomberg survey of 17 analysts (AIG:US). The insurer has gained about 39 percent in the past 12 months.
Bonuses for some employees fell short of targets because certain units didn’t meet 2012 profitability or sales goals, Benmosche said.
The insurer became the largest in the world under former CEO Maurice “Hank” Greenberg, who left in 2005. AIG then narrowed its focus to global property-casualty coverage and U.S. life insurance as part of a plan made after the 2008 bailout, which swelled to $182.3 billion.
Benmosche, who became CEO in 2009, is now targeting emerging markets like China and Turkey for growth and seeking to increase sales to consumers as the company scales back from some more capital-intensive business coverage.
“What you’re going to see is, we continue to re-emerge as a strong global insurance company,” Benmosche said. “You’re going to see us continue on the commercial side, which we’re already very, very strong. But we’re also going to become a global consumer sales organization on all life products.”
AIG reached a deal last month with HSBC Holdings Plc to sell some insurance in Europe, paying $55 million to be the exclusive seller of non-life products to the bank’s customers in Turkey and France, according to a Jan. 28 statement. The U.S. insurer said this month that it had agreed to take full ownership of an Israeli business that sells consumer coverage.
The deals “remind us of the company shaking off its shackles, and refocusing on its unique leverage to global growth,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., said in a research note.
AIG has 63,000 employees (AIG:US), compared with 57,000 a year earlier and 116,000 at the end of 2008, the company said in a regulatory filing. Property-casualty chief Peter Hancock said the unit recorded $100 million of severance costs in the fourth quarter.
The workforce increase stems from a decision to reclassify some agents as full-time staff, as well as the acquisition of a broker dealer, Benmosche said. AIG plans to boost head count again this year.
“We are hiring and we are going to continue to hire,” Benmosche said. “We’re going to bring work in that we’ve given to contractors and start doing more ourselves.”
AIG plans to shift some workers to lower-cost locations, Benmosche said, citing a 1,000-person operation in Amarillo, Texas, as an example. He said office space will be consolidated.
“Our costs are too high and we have to move work to centers where we feel we can get our costs down,” the CEO said.
AIG has said it is working to cut expenses by $1 billion from 2010 by the end of 2015. Eliminating high-cost debt is the top priority for use of cash, ahead of dividends or share repurchases, Benmosche said yesterday on a conference call. AIG offered this week to buy back as much as $1.25 billion of debt securities.
Share buybacks would be “far more accretive,” John Nadel, an equity analyst at Sterne Agee & Leach Inc., said in a research note, cutting the stock’s rating to neutral. “Timing and size of expense saves in 2014 and beyond remain cloudy, and capital management for the foreseeable future will remain focused on debt paydown.”
Chairman Steve Miller said in a letter to investors that board members have been meeting with representatives of the Federal Reserve, which regulates AIG. The insurer is preparing to be designated systemically important, which may subject it to additional capital rules and scrutiny.
AIG has become simpler by paring units and almost eliminating the risky bets that led to its 2008 rescue. Still, there’s a limit to how much can be done to curb complexity, Benmosche said.
“Some days you wish you could have a simple company,” he said on the call. “But then we wouldn’t be AIG.”
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