Last week AIU Holdings, AIG's former commercial property-casualty arm, was rebranded Chartis, with Kristian P. Moor named as president and chief executive officer. Moor joined AIG's National Union in 1981. He previously served as executive vice president of AIG and president and chief executive officer of AIG Property Casualty Group, with responsibility for all commercial and personal lines property-casualty business in the U.S. and Canada. AA&B spoke with Moor about the future of the unit and the role of its distribution force in attaining these goals.
AA&B: In the past we've spoken with John Q. Doyle, head of AIU's domestic p-c business, on broker strategies and relationships. What are your big-picture plans for the role brokers will play in the new Chartis organization?
Moor: Brokers will continue to be a critical part of our distribution strategies. We have always maintained strong relationships with brokers and I don't foresee any changes to how we build and maintain those relationships. Brokers are important intermediaries who play a vital role in helping the customers purchase coverage and helping the carrier to better understand the needs of the customer. They are often in the best position to evaluate our products and services relative to others in the industry and, as such, they are critical advocates for our superior ability to help clients manage risk.
Many of our brokers provided invaluable input to our rebranding process. They are excited about the new Chartis name because it and the formation of the special purpose vehicle (SPV) distinguish who we are, what we can do for brokers and clients, and how stable and financially strong we continue to be. We will continue to be guided by what has made us a success over the past 90 years: our global leadership position in property-casualty and general insurance with the largest geographic footprint of anyone, a breadth of product that is unrivalled, a broad risk appetite, experienced underwriting and claims service professionals and industry-leading financial strength.
With our new name, the SPV and management team in place, we are focused on unifying our worldwide businesses under one management structure and brand. We think this more integrated platform will benefit our brokers and clients.
In a lot of respects, we are closer to our brokers now than we have ever been. We will continue to make broker communications and relationships a priority as we progress toward global integration and operating independence.
AA&B: What if any internal management or structural changes will take place within Chartis under the reorganization?
Moor: In the coming days and weeks, we will name some of our top executives to global positions that will facilitate the integration of our foreign and domestic operations under one management team. There are no plans to alter our current business management structure.
AA&B: Bloomberg News last week reported that AIG used $2.4 billion in assets sales to shore up Chartis's capital in lieu of paying back TARP debts. Are you concerned about your unit's financial stability or claims-paying ability, and/or the public perception of same?
Moor: To begin with, when assets sold are owned by AIG's insurance subsidiaries, proceeds have first been applied to maintain appropriate levels of capital in AIG's insurance subsidiaries, as is required by AIG's state regulators and ratings agencies, while remaining amounts have been paid to the government.
Secondly, Chartis offers industry leading capacity and has superior financial strength on its own. In 2008, one of the most challenging years on record (compounded for us, of course, by the situation at AIG), we generated combined worldwide operating income of $3.3 billion, gross premiums of nearly $50 billion, and cash flow from operations of $5.7 billion. At year-end, our combined worldwide statutory surplus was over $32 billion. These financial resources enabled us to pay an average of $71 million in claims worldwide every day in 2008. Our balance sheet remains strong. We generated operating income of $816 million in the first quarter of this year, excluding realized capital gains and losses. And, importantly, we have no debt.
AA&B: Concerns have been voiced about AIG's price-cutting to retain business in the current market. Can you comment on that, and do you care to predict if and when we can expect to see significant rate hardening in the commercial p-c market?
Moor: We have not changed how we underwrite or price our business. Several entities that have reviewed our pricing in the near past, including the U.S. Government Accountability Office and state regulators, have found nothing unusual about our pricing or actions in the marketplace. As we have stated previously, we believe that allegations that we are inappropriately underpricing business to retain market share are untrue and are competitively driven.
AA&B: What areas of business do you anticipate the most significant growth?
Moor: When you serve more than 40 million clients in over 160 countries and jurisdictions, you have a tremendous opportunity to grow anywhere in the world. Our growth plans include the elements of what has made us a success the past 90 years: a global leadership position in property-casualty and general insurance with the largest geographic footprint of anyone, a breadth of product that is unrivalled, a broad risk appetite, experienced underwriting and claims service professionals and industry-leading financial strength.
These characteristics have historically led to even more opportunities and we expect them to continue to do so. Another key element of our growth will be the unification and integration of our operations worldwide, which we think will benefit brokers and clients. Our new brand and the SPV formation are significant steps in this regard.
AA&B: What sort of branding efforts will Chartis pursue to differentiate and separate itself from AIG?
Moor: Beginning with our announcement on July 27, the brands in our portfolio that go to market under the "AIG" and "AIU Holdings" names will begin to transition to the Chartis brand. We are prioritizing changes worldwide based on local considerations as well as the most cost-effective way to optimize the business value globally. We continue to evaluate a handful of our local subsidiaries to determine if these entities should be retained as standalone brands due to local brand value, or migrate to the new brand identity.