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American International Group has disclosed significant leadership changes as well as plans to separate its Life & Retirement business into an independent company.

Peter Zaffino, currently ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s president and chief operating officer, will become its next CEO as of March 1, 2021. He’s also taking on a director role, effective immediately.

Current CEO Brian Duperreault will continue with the company as executive chairman, and he’ll take on that new role also on March 1. With this change, Douglas Steenland, currently Independent chairman of the board, will become Lead Independent Director.

The leadership transition was widely expected. When Duperreault became ÌìÃÀÍøÕ¾´«Ã½´«Ã½ president and CEO in 2017, he brought on Zaffino – then the Marsh CEO- . Zaffino later took on the title of president from Duperreault, and during ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s quarterly earnings calls with analysts. Both worked closely together at Marsh parent Marsh & McLennan Cos. when Duperreault ran the operation from 2008 through 2012.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ under Duperreault’s leadership , particularly the fortunes of its General Insurance, or property/casualty business. Duperreault, in turn, credits Zaffino with playing a crucial role in the process. He said in prepared remarks that Zaffino “has been instrumental in the significant turnaround and transformation at ÌìÃÀÍøÕ¾´«Ã½´«Ã½ and his vision, determination and pursuit of excellence will help ensure the company’s future success.”

Zaffino said in prepared remarks that he is looking forward to leading ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s “next phase” on its way “to becoming a top performing company.”

Goodbye to Life & Retirement

Alongside the Zaffino announcement, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ said it would separate the insurer’s Life & Health business into its own entity.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ in its announcement stressed that “no decisions have been made as to how to achieve a full separation,” but the company plans to do so “in a way that maximizes shareholder value and establishes two independent, market leading companies.”

Duperreault said that the decision to pursue a separation of its Life & Retirement business is an outgrowth of the last three years, during which ÌìÃÀÍøÕ¾´«Ã½´«Ã½ has “taken significant action to de-risk ÌìÃÀÍøÕ¾´«Ã½´«Ã½ and position the company for profitable growth, including fortifying General Insurance, diversifying Life & Retirement, significantly strengthening ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s capital and liquidity position, and building a world-class team. ”

Zaffino said that separating Life & Retirement from ÌìÃÀÍøÕ¾´«Ã½´«Ã½ will continue that improvement process, and “will enable each entity to achieve a more appropriate and sustainable valuation.”

The issue of whether to downsize ÌìÃÀÍøÕ¾´«Ã½´«Ã½ is not exactly new.

Billionaire investor Carl Icahn before Duperreault’s arrival, and threatened a proxy fight with management over the issue. Specifically, Icahn wanted ÌìÃÀÍøÕ¾´«Ã½´«Ã½ to split into three companies, offering property/casualty insurance, life insurance and a third backing mortgages.

Any action to separate the Life & Retirement business is pending various conditions and approvals, including approval by the ÌìÃÀÍøÕ¾´«Ã½´«Ã½ Board of Directors, receipt of insurance and other required regulatory approvals, and satisfaction of any applicable requirements of the Securities and Exchange Commission, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ said.

Keefe, Bruyette & Woods (KBW) analyst Meyer Shields said that while there is “no assurance” about form, timing, terms or “that a separation will in fact occur,” he does think the proposal signals material confidence in ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s post- separation P/C insurance prospects, where results have been significantly challenged.

The life and retirement revenues were 34% of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s overall $49 billion in 2019 revenue; with 64% being from its general insurance business, according to the company’s annual report.

In 2016 ÌìÃÀÍøÕ¾´«Ã½´«Ã½ did downsize somewhat by selling off its advisor group and part of United Guaranty Corp., its mortgage insurer.

Changes Amid High Catastrophe Losses

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ announced its leadership and Life & Retirement plans along with a third disclosure concerning its 2020 property/casualty third quarter catastrophe losses.

Those losses from ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s General Insurance arm hit $790 million pretax, including $185 million from COVID-19-related claims due to its travel, event cancellation, trade credit, property, agriculture and casualty books of business. The rest came from windstorms and tropical storms in the Americas and Japan, along with wildfires on the U.S. west coast.

Duppereault said ÌìÃÀÍøÕ¾´«Ã½´«Ã½ has faced a limited impact from those losses, due to its “underwriting discipline, reinsurance programs, revamped risk appetite” and its balance sheet.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ plans to report its 2020 third quarter results after the market closes on Nov. 5, 2020. Its quarterly earnings call will be on Friday, Nov. 6, 2020, starting at 8 a.m.

Republished from , the publication for the property/casualty C-suite.

Topics Property Property Casualty ÌìÃÀÍøÕ¾´«Ã½´«Ã½ Casualty