hostedmore than 20 sell-side analysts at its New York headquarters on March 28, as ittries to restore confidence in its management team following a turbulent period.
CFO SiddharthaSankaran and AIG Commercial CEO Robert Schimek led the private meeting, devotingroughly two hours to answering analysts' questions about the company's prospectsand strategic initiatives. The discussion focused largely on AIG's efforts to fixits underperforming commercialinsurance business, attendees said, as well as the status of its expense and capitalmanagement plans.
Thoughthe two offered little new information on the company's progress, the session servedas a much-needed opportunity for the analyst community to familiarize itself withAIG's new leadership. The company laid off a slew of senior managers as part ofits expense reductions, in the process jettisoning individuals who were popularwith the analysts and installing relative unknowns. The turnover analysts' and investors' faith in AIG,especially amid the company's broader struggle to hit its financial targets.
"Mostexecutives, in public and even mutual and private [companies], are going to be namesthat are somewhat familiar to me, and they weren't. And that means I would naturallyhave less confidence in the execution," Sandler O'Neill analyst Paul Newsomesaid in an interview, adding that many analysts had never talked with Sankaran orSchimek before. "You typically end up assuming the worst."
The Q&Agave analysts the chance to both meet Sankaran and Schimek and pepper them withquestions about the company. Analysts said they left the meeting more confidentthat the executives grasp the insurer's challenges and are working to resolve them.
"Themeeting was an important step in beginning to rebuild the firm's credibility witha very skeptical sell-side community," Sanford C. Bernstein analyst Josh Stirlingsaid in a note to clients. "Management handled the meeting well, and with anopportunity to personalize the new leadership and really kick the tires, we thinkthe sell-side will start to give them a bit more of a chance."
AIG istrying to win back analysts and investors in the wake of a rocky couple years underPresident and CEO Peter Hancock. The insurer consistently failed to meet its ownearnings targets and has suffered from a series of surprise reserve . In late 2015, activist shareholderCarl Icahn led a campaignto break AIG into three distinct entities as a way to improve shareholder value.That bid ended in February, after the insurer agreed to nominate new board in addition to making deepercost cuts and streamlining its operations in hopes of hitting a 9% ROE by 2017.
But AIGhas yet to convince investors to buy into that optimism. The insurer's stock hasfallen 3.56% since the January announcementof its companywide restructuring, even as the S&P 500 climbed 9.48% over thesame period. Sandler O'Neill's Newsome attributed some of that gap to investors'reluctance to put their trust back in the company before it shows that it can makeconcrete progress.
"Thereason why the multiple is as low as it is has to be because investors don't believethat the stock value is equivalent to what the accounting value is," he said."If you really thought that AIG's management was going to be able to executeeverything, that the ROE would go up to double digits, that the balance sheet iswhat it is, that they don't have to take future reserve charges, if you really believethat, the stock would trade at at least book value. So somebody out there doesn'tbelieve the company and hasn't for a long time."
Now thatits strategy and management team is in place, AIG is focused on changing those beliefs.The company met with various large shareholders in recent months, spokesman JonDiat said in an email. And though analysts said the meeting with Sankaran and Schimekdid not produce any major revelations, it nevertheless served as a building blocktoward repairing the company's image.
"Historydoesn't repeat, but the last time AIG held a similar meeting [was] in April 2013to introduce Peter Hancock," Stirling said. "As AIG's story began to bebetter covered by the street, AIG's stock outperformed over much of the followingyear."