“...By Any Other Name”
From AIG to Chartis to AIG to...
“American International Group, Inc.’s decision to return to the ‘AIG name in full’ rather than operating its commercial property/casualty business under the Chartis brand is drawing generally positive reaction from market observers.”
- Business Insurance, July 2, 2012
I started in this business at the American International Group. I’m really not sure why they hired me. I was reasonably intelligent, young, spoke several languages, and cheap to employ. (AIG always was a lousy pay; the benefits, though, were great.)
It was quite simply the best work experience I’ve ever had in my career...including my 25 years of self-employment. I worked in New York City at both 102 Maiden Lane and 70 Pine Street. Within a couple of weeks of my starting, I had lunch with Hank Greenberg, the then CEO and the man who had grown the AIG into the powerhouse it was. I had been informed ahead of time by my boss that being summoned to lunch with Hank was like being summoned to lunch with God. He was just about correct. The menu cards in Hank’s executive dining room, filled with Chinese art, and where we were waited on by Chinese servants, showed what you were eating and gave you the calorie count in parentheses alongside the choices. Hank was and still is very health conscious and in great shape. He is, alas, no longer AIG’s CEO. However, I’m pretty sure that he will outlive all the nonsense going on at the AIG as they flip-flop back and forth with name changes that are convenient one week and inconvenient the next.
Within a few weeks of my hiring at the AIG, my boss came into my office one day and told me that I had been appointed “Worldwide Director of AIG’s Personal Accident Division.” I asked him what that meant, and he replied, “You’ll figure it out.” I asked him how many employees my division would have, and I remember him only laughing. That afternoon, applications for personal accident insurance for people like the jazz trumpeter Dizzy Gillespie and the basketball team the Indiana Pacers showed up on my desk for underwriting and pricing. I had no idea what the hell I was doing...but it was great fun.
You see, that was the neat thing about the AIG. They threw stuff at you, and you either had to figure out how to do it yourself and make a profit at it, or you were shown the door.
So in the space of a few weeks, I became somebody important at the AIG through sheer luck. Everything I use today in my business I learned by doing at the AIG. How to create a policy form. How to cajole a state regulator into permitting me to make a “me too” filing. How to negotiate an agent’s commission. How to turn down a risk as unacceptable. How to arrange reinsurances. I made plenty of mistakes, but I also scored, and I did it because Hank Greenberg created a culture at the AIG which recognized individual initiative, hard work, and the ability to get the job done; and he prized, above all else, individual initiative, intelligence, and sheer pushiness. We were a pretty arrogant bunch at the AIG...and, guess what, we had the success to show for it.
So when the AIG hit the skids in late 2008 and early 2009, I was surprised. I was surprised because it wasn’t Hank’s style to let that happen. (His fingers touched everything in the AIG, and after having only met me once, he still remembered my name.) I was surprised because what caused the trouble was a business the AIG had gotten into which had nothing to do with selling insurance to people...and selling insurance to people is what Hank Greenberg knew how to do, and his mentor C.V. Starr, the founder of the AIG, knew how to do even better. The AIG lost its way. When it did that, it got into trouble. C.V. Starr made his fortune and made the AIG into an international force selling individual policies to the Chinese before the Revolution. C.V. Starr would not have recognized a derivative if it had jumped up and punched him in the nose.
As a consultant who now opines on the quality and integrity of property and casualty insurance programs, I take what I do seriously. Much to the dismay of every broker I came into contact with, by early 2009, I refused to certify programs carrying AIG paper. I was threatened by brokers and clients both, and I was prepared to resign to make my point.
Then, the most Orwellian scheme of all came into play.
AIG’s property and casualty business changed its name to “Chartis.” I guess they figure that they were “charting” a new course. Beats me...but I had worked at the AIG, and I knew better.
You see, I trained with some of the best and the brightest at the AIG, and as I would underwrite a risk in my tiny made-up worldwide division of one...I had been trained to accompany each approved application, as it was about to be sent to accounting, with a reinsurance line slip. That line slip was a checklist. If I wrote a piece of personal accident business with a $1 million face amount, by the time that app left my office, I had assigned 100% of the risk, in percentages, to reinsurers.
No big deal, you might say. But it was a big deal...for all the reinsurance for the policy I had underwritten on American Home paper (an AIG company) was reinsured among companies also owned by the AIG...20% to the New Hampshire Insurance Company; 15% to American International Life; 30% to the Insurance Company of the State of Pennsylvania; etc., etc....all of them sister companies of the American Home. In other words, we wrote a risk, and we wrote risk after risk, and all of it was spread out among the balance sheets of companies within the AIG family.
So here’s what we were doing back in the glory days of the AIG: we were spreading risk and premium internally and not externally. We underwrote and accepted all of our risk as net. We were only as good as the balance sheets we were moving risk to, since the American Home itself kept no net line in the business I underwrote. It was not an issue back then, because no balance sheet individually or collectively was stronger than the AIG’s in those days. We were the rulers of the world.
Now, fast forward to the crisis that almost sends us into a second Great Depression.
There’s a long history of sharing reinsurance risk among the member companies of the AIG, and that concept was still in place on certain classes of business when the AIG sank under the weight of its own mistakes in the beginning of 2009. That was my problem.
I can change the name Michael Maglaras to Abraham Lincoln if I want to, in order to avoid stigma, a loss of market share, or reduced insurance broker confidence...but if I’m still parceling out reinsurance risk among the very insurers in my family whose balance sheets are in doubt, then I might just as well have kept my own name. The AIG went to Chartis when the name became an albatross around the market’s neck. On July 2, 2012, I got an email saying that Chartis was no more, and we were going back to AIG.
I can keep changing my name, but if I don’t change how I do business it’s not really going to make any difference.
Those of us who follow the industry know that Robert Benmosche was handed an impossible task when he became CEO of AIG and was left, when he took over, to pick up the pieces of an organization bailed out by tax payers like you and me. He has done an admirable job. I no longer withhold, as a rule, my opinion when Chartis (now back as AIG) paper is used.
My problem is a simple one. We need to be careful about hasty re-branding when times are rough, and then shrugging the re-branding off as some kind of “Mad Men’s” error, when things start to improve. The insurance business is fraught with political correctness, and there is no better example in our industry than this name switch. As much as I’d like to be temporarily known as Abraham Lincoln when things get rough, I think I’ll take my ups and downs...in life and in business...with my own name.
We need to focus less on the name, and more on the quality of the paper, and remember what George Orwell wrote, “During times of universal deceit, telling the truth becomes a revolutionary act.”
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"Permit me to change your name, my dear."
"And what, may I ask, is wrong with the name Hiram H. Higginbottom?"
"Someone's covered the name 'Chartis' with a Post-it note that says 'AIG' on this policy!"
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