Ever since Peter Hancock took over the role of Chief Executive Officer of American International Group, Inc., there have been some profound management changes. His most recent alteration included having the company’s Chief Financial Officer, David Herzog, leave the company. Herzog is being replaced by the Chief Risk Officer, Sid Sankaran. Another recent change is the stepping down of the Head of Commercial Insurance, John Doyle, with CEO of the Americas, Rob Schimek, taking over.
The reason that the leadership began to be dramatically restructured when Hancock took over last September had to do with AIG’s results. For years, the company has had high claims costs, and the company was forced to recover from a bailout around the year 2008. Hancock announced during that time that he wanted to dismiss at least 23% of the people in leadership positions.
He is following through with the plan, but whether or not the restructuring will be beneficial to the company as a whole is still a question.
Herzog’s departure was more of a shock than that of Doyle. Doyle was not getting expected results in his position, but Herzog was a real asset to the company. He was recognized as a great CFO by the United States Treasury Department, and helped pull AIG out of their bailout. Many experts believe that asking Herzog to leave was a mistake by Hancock. However, the rumor is that Herzog will take the millions he made in his position at AIG and retire, although he has not commented on the matter
Activist investors are trying to force Hancock to break up the company into smaller parts, and that is exactly what Hancock is trying to avoid. The investor Carl Icahn has been especially vocal on this matter. He has the idea that AIG should have a life insurance sector, a property coverage sector, and a mortgage sector, all separate from one another. Hancock has not adhered to this demand.
Many other changes are taking place on the leadership level of AIG. The leadership team as a whole is becoming a lot smaller, and those already in leadership positions are taking on more responsibility in the United States and overseas.
Will this leadership overhaul help AIG in the long run? Only time will tell. It is my opinion that AIG has been suffering, so large change is necessary to pull the company out of its slump. Whether or not Hancock is taking the right approach remains to be seen.
For more information on Hancock’s plan, check out Insurance Journal.