Insurer considers name change as AIU Holdings assumes financial control of bailed-out group
The AIG brand is set to disappear from the UK as the insurer is incorporated into a new parent company, AIU Holdings.
Lex Baugh, chief executive of AIG UK, said it was likely a minority stake in the holding company would be listed or sold to a third party sooner rather than later, restoring AIG UK’s financial credibility and giving an indication of its market value.
AIG UK is currently considering new names and reviewing its brand.
But Baugh said the market had been supportive of the insurer and changes to its front-office operations and business strategy would be limited.
His comments came after AIG, the world’s biggest insurer and AIG UK’s parent, posted the biggest loss in American corporate history – $61.7bn (£43.9bn) for the fourth quarter of 2008. The US government stepped in to save the insurer from collapse for the third time with a $30bn bailout, but effectively disbanded it as a result.
Its global property and casualty business, including AIG UK, is to be put into AIU Holdings, which will operate at arm’s length from AIG, with a separate brand and management structure.
Baugh said: “Very little is going to change in the short term. The discussions about AIU Holdings have been more about the financial structure of the company than about underwriting or servicing.”
He added that companies within AIU Holdings could have their finance, IT and other back office functions combined.
Baugh said a sale of a minority stake in the holding company would “give us a bit more financial credibility and be a good benchmark in terms of what the entity is worth in the marketplace”.
He said it was very unlikely that AIG UK could be sold as a separate unit, because the value of AIU Holdings was in its global clout.
He would not rule out a complete sale of AIU Holdings at a future date.
Baugh said AIG UK’s upcoming financial results would show the business was healthy, with a combined operating ratio in the low 90s. He said the market continued to be supportive and he had written to brokers to outline the situation.
One leading broker told Insurance Times he was reassured by the US government’s continued backing of AIG and would continue to place new business and renewals with the insurer.
But he added: “We will warn clients about the situation and keep a watching brief on AIG.”