Benmosche: Chartis Retaining Customers; Did Not Under-Price Business

AIG CEO Robert Benmosche boards an elevator on Capitol Hill in Washington, May 26, 2010. (AP Photo/Pablo Martinez Monsivais) AIG CEO Robert Benmosche boards an elevator on Capitol Hill in Washington, May 26, 2010. (AP Photo/Pablo Martinez Monsivais)

NU Online News Service, Feb. 16, 3:10 p.m. EST

Chartis companies have been able to retain 90 percent of their customers despite the economic turmoil American International Group has endured since 2008, AIG Chief Executive Officer Robert Benmosche said at an investment conference Wednesday.

“We still do business today with 97 percent of the Fortune 1000,” Benmosche said.

“This is not about getting clients,” he said. “It's about doing more with clients.”

Benmosche made his comments at the Bank of America Merrill Lynch Insurance Conference held inNew York.

Discussing a broad range of topics, Benmosche said AIG is in the process of upgrading its worldwide accounting system and taking a hard look at its “catastrophe load and its reinsurance contracts,” and is assessing how to budget going forward for potential catastrophic losses.

He noted that Peter Hancock, Chartis CEO has recently hired a chief science officer.

“We are going to start studying the data around the globe to really start to better understand what patterns are happening out there,” Benmosche said,

And, on another topic, Benmosche said he is not concerned about the company being designated as systemically significant, and therefore subject to regulation by the Federal Reserve Board.

“People say, ‘Are you worried about being a SiFi? Are you worried about the Federal Reserve?’ No,” Benmosche said. “I welcome it.”

He said AIG has “an enormous amount of money” sitting at the holding company, not at the regulated insurance entities, so the company has enough capital to be flexible in dealing with problems at the operating level.

Benmosche also discounted talk that Chartis has been able to maintain its customer list by substantively underpricing its products.

“The fact is that is not true,” Benmosche said. “We've demonstrated that with the data.”

He added that the company wants to make sure it gets “a risk-adjusted profitability in Chartis, which means at  least earn your cost of capital.

“Don't kid yourselves that you can earn money in investments and other things outside the combined ratio,” Benmosche said.

“Get it right, and earn your cost of capital and then a make a profit on top of it.”

He said the reorganization of Chartis is almost complete and that AIG plans to grow Chartis “by doing more consumer business around the globe and by continually focusing on growth economies.”

In his comments, Benmosche said the company is nearing a decision on the way it will divest its aircraft-leasing subsidiary, but is being cautious and will take its time in order to ensure it gets the most for this business.

Noting that the leasing subsidiary has more than $35 billion in planes on its books, he said “you are dealing with a big nut in here.”

He said he will determine the best way to divest the company “by doing what makes the most sense for the company, and we'll examine everything.”


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