AIG turns to Zaffino to continue transformation

Outgoing American International Group Inc. CEO Brian Duperreault met his goal of placing the insurer on the path to profitable growth, but analysts say his successor will be tasked with achieving more consistent results.

After manning the helm for nearly four years, Duperreault, is stepping down from the chief executive position and shift into the role of executive chairman. Peter Zaffino, currently AIG's president, is set to take over the CEO role on March 1.

Duperreault's legacy

Duperreault took over at AIG in May 2017 following the tumultuous tenure of Peter Hancock, during which time the company's property and casualty business deteriorated "significantly," Piper Sandler analyst Paul Newsome noted. "The board hired Brian Duperreault to come in and kind of rescue the firm."

It was a position in which Duperreault, who started his career at AIG as an actuary, was familiar, having served as chief executive at several major players in the insurance space, including Marsh & McLennan Cos. Inc., Hamilton Insurance Group and ACE Ltd.

"He has righted a lot of ships," CFRA analyst Cathy Seifert said in an interview. "That was sort of the value that he brought to AIG in 2017 when he was asked to rejoin the firm."

As CEO, Duperreault made substantial changes in senior management and worked to turn around the property and casualty business on a fundamental level, Newsome said, with a focus on AIG's underwriting and business management, as opposed to sweeping strategic shifts.

His mission, as Wells Fargo analyst Elyse Greenspan put it, was "to improve the profitability and the mix of business at AIG." And on that he was "successful," she said.

Over the course of Duperreault's CEO tenure, AIG completed five insurance deals, the largest of which being the $5.54 billion purchase of Bermuda-based Validus Holdings Ltd. in early 2018.

Greenspan called the Validus deal "additive" to AIG's result, and said it "will enable AIG to reap the benefits of a much firmer reinsurance market."

The company also has targets for its property and casualty business to show growth in 2021, Greenspan noted.

"I think there's line of sight into both returning AIG's P&C business to growth mode and having all the business mix initiatives... in the rearview mirror. [There is] also line of sight in terms of continuing to improve the profitability from both a loss and expense ratio perspective," she said.

Still, AIG has much to do in order to demonstrate the stability of the improved underwriting results its property and casualty business has been generating on an underlying basis.

"We haven't really seen the return to consistent profitability that we would like," Newsome said. "It's on the way and is coming, but it actually hasn't shown up yet."

Zaffino's path ahead

That task will now fall to Zaffino, who will maintain his position as president while also joining AIG's board as a director.

During the company's most recent earnings call, Duperreault credited Zaffino, with the design and implementation of a "historic" turnaround in AIG's general insurance business, and he offered assurance that his successor would be "an excellent CEO for AIG."

That confidence will be tested sooner rather than later: Zaffino will enter the CEO role needing to execute on AIG 200, a multiyear plan to refine AIG's core processes and infrastructure, and to oversee the separation of its life and retirement business.

Arguably, one of Duperreault's biggest accomplishments could be that there is a clear successor to his role at all, something his former boss, Hank Greenberg, had been criticized for. AIG had just two chief executives during its first 86 years — including Greenberg from 1968 to 2005 — but has flicked through half a dozen CEOs in the past 15 years.

"If you wanted to stretch a bit, you could say that [Duperreault's] departure maybe increases the execution risk, but I don't wholeheartedly support that notion," CFRA's Seifert said. "I think there are also plenty of people at the firm able to carry on that legacy."

AIG declined to provide an on-the-record comment for this story.