American International Group Inc. (AIG) promoted Peter Hancock to chief executive officer as the company focuses on growth after his predecessor stabilized the insurer and paid back a 2008 government bailout.
Hancock, 55, oversees property-casualty insurance and will be CEO and president as of Sept. 1, the New York-based firm said yesterday. He previously spent 20 years at a predecessor to JPMorgan Chase & Co., where he established the derivatives group. He replaces Robert Benmosche, 70, who stayed on longer than previously planned.
"AIG is no longer burning down, and the challenge for AIG and for Peter as CEO is to continue to drive the transformation," Josh Stirling, an analyst at Sanford C. Bernstein & Co., said in a phone interview. "People are very much looking for real signs of progress."
Hancock takes over a company that has shrunk by half since 2008 as Benmosche sold assets and cut jobs to simplify the business and repay a rescue that swelled to $182.3 billion. The firm is now focused on global property-casualty coverage and U.S. life insurance and retirement products. Jay Wintrob heads the life unit and intends to stay with AIG, though he is disappointed he wasn't selected as the company's CEO, Chairman Steve Miller told reporters.
Hancock joined AIG in 2010 to oversee finance and risk. In 2011, he was promoted to run the property-casualty business, an operation that became increasingly important to AIG as the company sold non-U.S. life insurers and a plane-leasing unit.
"Property and casualty is not only our largest business, but it's our most complex business and it's the one that can most effect the future success of AIG," Miller said. "He's the one who has dealt with the thorniest issues."
Hancock sought to expand in less capital-intensive lines of insurance after AIG was burned by higher-than-expected costs in commercial segments including workers' compensation, where claims emerge years after policies are sold. He targeted emerging markets and sales to consumers.
Hancock said in an interview that he plans to focus on customer segments and products where AIG is "properly rewarded" for taking risks. "And to do that we are investing in research and development to really understand emerging risks better."
The insurer said in 2010 that Benmosche was undergoing chemotherapy for cancer, increasing the urgency for succession planning. Benmosche, who previously postponed plans for retirement, said his latest intent was to stay on until February, and that succession was accelerated because "the transition was taking too long." The board's vote was June 9, he said in an interview.
He said that "things are going OK" with treatment for his cancer and that Hancock's hiring represents continuity. "If the board wanted a dramatic change, they would have looked for someone outside," he said.
Hancock becomes the company's sixth CEO since 2005, when Maurice "Hank" Greenberg stepped down amid accounting probes after building AIG into the world's largest insurer. Martin Sullivan left in 2008 after underestimating the potential for losses on bets tied to subprime mortgages. Robert Willumstad lasted only months, and Edward Liddy, who took over with the bailout, was replaced by Benmosche the next year.
Benmosche previously led MetLife Inc., the largest U.S. life insurer. He came out of retirement in August 2009 to take over AIG, which was reeling from losses, and set the company on the road to repaying taxpayers. Along the way, Benmosche became the most outspoken AIG chief since Greenberg.
Benmosche sparred with government overseers, rebelled against U.S.-imposed pay caps that he said limited the firm's ability to retain staff, threatened to quit and succeeded in ousting then-Chairman Harvey Golub with a him-or-me showdown.
"I create so much trouble, don't I?" Benmosche told employees at a 2009 meeting. "That's my job."
He also criticized lawmakers for contributing to the public backlash against bonuses the firm paid, calling them "crazies down in Washington."
The CEO's intent was to show employees somebody would stick up for them, said Ernest Patrikis, AIG's general counsel from 1999 through 2006 and now partner at White & Case LLP.
"What Benmosche did was get employee's morale on track," Patrikis said. "You needed someone to punch back."
He also reinstated the dividend and reduced debt. Benmosche sold units including American Life Insurance Co. in 2010 and International Lease Finance Corp. last month.
"I don't think it was a coincidence that this announcement was made at the first board meeting held post-ILFC close," Charles Sebaski, an analyst at BMO Capital Markets, said in an interview. "This was the last leg of non-core assets that had to be dealt with, and now he can hand over a clean entity. He doesn't walk out the door with an anvil over the new CEO's head."
The insurer's market value is about $80 billion, compared with $148 billion at the end of 2007. The employee count is down 45 percent in the six years ended Dec. 31 to 64,000.
Hancock has sought to build relations with regulators, including the Federal Reserve, which helped bail out the company. The central bank will oversee AIG because it was deemed a systemically important institution, and Hancock said in 2011 that his company was working to become "Fed ready."
He reiterated last month his embrace of the supervision, in contrast with MetLife CEO Steven Kandarian who has spoken out against what he sees as the risk of over-regulation.
The Fed does "a good job of helping us coordinate our message to the other regulators, also, importantly, to rating agencies," Hancock said at an investor conference in May. "We're being held to very high standards there and we welcome that."
Hancock was raised in Hong Kong and attended Oxford University, where he earned his bachelor of arts degree in politics, philosophy and economics, AIG said in the statement.
Jon Diat, a spokesman for the company, said it is too early to comment on who would be the next leader of the property-casualty operation. Benmosche is expected to resign from the board and take an advisory role with the company, AIG said.
"Benmosche stepped into the crucible when he took over at AIG," said David Havens, a managing director and credit analyst at Los Angeles-based investment bank Imperial Capital LLC. "Hardly anyone expected AIG to succeed to the extent it has, and a great deal of the credit should go directly to him."