Ellen Bennett comments on AIG's new leader.
It was only a matter of time before Martin Sullivan became the latest casualty of the credit crunch. With AIG having lost 41% of its value in the past year, following £10bn of writedowns on sub-prime investments, someone was going to have to take the flak, and who better than the chief executive? But it’s interesting that Sullivan is still widely regarded as having been among the most capable chiefs of the major insurers and, in fact, none of AIG’s woes has been linked to its core insurance businesses. The cash rich insurer decided to diversify into loosely defined “financial products”. It was this side of the business, and the insurer’s investments, that suffered in the US sub-prime mortgage crisis, leading to those horrible headlines that eventually did for Sullivan, with a little help from his forerunner and major shareholder Hank Greenberg.
There have been suggestions that British-born Sullivan had a focus on his home country that won’t be shared by his successor Robert Willumstad. But given the powerful role of AIG’s shareholders in ousting Sullivan, Willumstad’s first job will be to appease them. There will be no room for sentiment. He has already hinted that he may get rid of some of those troublesome non-core assets, and divisions and jobs may be shed.
So what does all this mean for AIG UK, the country’s seventh largest insurer? Probably not that much. While big strategic moves – such as buying RBSI – are likely to be off the agenda until the US boardroom has straightened itself out, everything else will be business as usual. When Willumstad comes to lay out his plans in September, AIG’s insurance businesses could even expect to benefit as the giant refocuses on its core.
‘ Has it only been a year? There has been so much discussion since the 2007 floods, so much to-ing and fro-ing between the government and insurance industry, that it feels more like a decade. This week, the ABI has reiterated its threat to remove cover from homes at risk of flooding (News, P8). Next week, Sir Michael Pitt will unveil his final recommendations. Then, the government must respond, or the ABI must make good on its threat and finally end this impasse.