By Tom Broughton, editor
Yet more astonishing news from across the Atlantic this week – and this development won’t be greeted with dancing in the streets. AIG announced a $24.5bn (£15.9bn) loss for the third quarter and then came reports that the stricken giant has renegotiated the terms of its Federal Reserve bail-out. The government rescue package now totals $150bn.
The insurer’s US management team has been forced to reassure politicians and convince them of the need for this huge cash injection. Its chief executive, Ed Liddy, has been treading a fine line. His remit is to get AIG out of trouble while simultaneously repositioning it for the future. His plan is to sell off the group’s life businesses and refocus the empire around its global general insurance operation – including the Asian division, which is considered the jewel in the crown. What this means for AIG’s UK business remains to be seen, however. It continues to be dogged by takeover rumours.
On the ground, most brokers and clients have given AIG UK a fair hearing. Lex Baugh, the UK managing director, has proved resilient in the face of adversity and has moved to provide stability and clarity. Rival insurers have been quick to target disgruntled staff and to offer their services to brokers as clients mull renewals. But Baugh has remained bullish. When required to face down detractors and provide certainty, he has done so.
As a consequence, it appears unlikely that AIG’s £2bn in UK premiums will be hit hard – especially if you factor in underlying growth. But that’s not to say that this situation can continue or that the British business is foolproof. Rival insurers will continue to raise the issue of competitive fairness – and why shouldn’t they?
At some point in the near future, once the fire sale is complete, the AIG group management team will want to restore the kind of global synergies that AIG UK is trying so hard to distance itself from. But as the debate surrounding the onset of global regulation develops, the relationship between the divisions of global companies will come under even greater scrutiny. And that may mean having to identify and highlight exactly what impact your parent company has on your business.