American International Group, or AIG, is one of the nation’s leading insurance companies. Over the past several months, analysts from Citigroup have discussed the idea of a possible merger between AIG and Alphabet, the parent company of Google. On paper, connections between the two seemed unfathomable, but upon further inspection, the partnership could be a positive one. If Alphabet were to partner with a large investment bank and purchase the insurance company, they could turn it from various insurance policies to an insurance FinTech laboratory.
Founded in 1919 by Cornelius Vander Starr, AIG traces it’s roots back to Shanghai, China. Starting as American Asiatic Underwriters, the company expanded and, within the first two years of operations, evolved into a life insurance company. Within the next decade, various branches emerged throughout different parts of China and Southeast Asia, followed by the first official American opening in 1926. The company was renamed the American International Underwriters Corporation (AIU) and growth in Latin America occurred afterwards. The growth in these agencies was substantial, as World War II loomed on the horizon, which correlated to the decline of business in Asia. As a result of these historical events, AIU moved it’s headquarters to New York City from Shanghai, China after 20 years.
With its long history, AIG’s merger with Google seemed unlikely. Analysts acknowledged it was an event that most likely would not occur, but one that could benefit everyone. The copious amounts of data AIG owns could be appealing to Alphabet, while having a parent company to help protect AIG from battles that could arise over the upcoming years could benefit AIG.
According to an article published by Quartz, the analysts developed their proposal around two main points. The first was a modular finance model. This is would shift financial institutions from what they do – selling a portfolio of products to consumers – to using technology to develop offerings that were complex on a whim. The second addresses the lack of disrupting insurance companies. Many companies focused on tech shy away from companies that focus on insurance because of the strict regulations that come with their industry.
Alphabet obtaining AIG for their portfolio could address both points. There are several challenges if this occurs, such as issues with shareholders and banks, but it could be worth the risk. AIG’s CEO, Peter Hancock, spoke about how the company’s new modules. Nine in all, were based off Alphabet’s business structure.