American International Group Inc. plans to sit out the unprecedented wave of insurance industry dealmaking and instead focus on integrating businesses in Japan.
The timetable for merging AIU with Fuji Fire & Marine has been pushed back to 2016 or later, AIG’s head of consumer insurance, Kevin Hogan, said on a conference call Tuesday. Peter Hancock, the chief executive officer of the New York-based insurer, previously said the combination could be completed as soon as this year.
AIG’s focus on Fuji, which it finished acquiring in 2011, contrasts with the approach of insurers such as Ace Ltd. and XL Group Plc. Ace CEO Evan Greenberg announced a deal last month to buy Chubb Corp. for more than $28 billion, and XL’s Mike McGavick acquired Catlin Group Ltd. this year for about $4 billion.
“I don’t think it has any implications for us needing to do a deal,” Hancock said on the call when asked about Ace’s transaction. “We are already, by many measures, one of the largest insurers,” he said. “And I think we’ve got a lot of work to do to digest the acquisition and merger in Japan with Fuji Fire.”
Travelers Cos. and Markel Corp. have also said they’d be interested in pursuing deals as insurers look to diversity risks and gain scale to appeal to clients and brokers. XL’s McGavick said in a separate call Tuesday that insurers could be left behind if they don’t pursue mergers.
‘Something Broader’
“Many may think they like their position,” McGavick said. “I think they’re going to find themselves more and more wishing to be a part of something broader and deeper. As those realizations come, there will be less and less partners.”
AIG, once the world’s largest insurer, sold dozens of operations to help repay a 2008 government rescue. Hancock took over after the bailout was repaid, and has continued divestitures, exiting an aircraft-leasing business as he worked to narrow the company’s focus.
The CEO has also focused on cutting expenses, and has repeatedly cited the chance for savings in Japan. Each unit has more than 4,000 employees, obsolete systems and branch networks that need to be converged, he said in June. The company has said the integration could cost about $250 million.
Postwar Period
AIG has a long history in Japan, the world’s second-largest insurance market. AIU opened there in 1946 as the first foreign- owned general insurer in the post World War II period, according to a timeline on the company’s website. AIG later built up majority control of Fuji Fire, which became a wholly owned subsidiary about four years ago.
The eventual timing of the Japan consolidation will depend on approval from regulators there, AIG said Tuesday.
AIG has made small acquisitions recently, purchasing a minority stake in K2 Intelligence to boost cyber offerings and agreeing to buy First Principles Capital Management in a deal that adds new Chief Investment Officer Doug Dachille.
In the second quarter, the insurer gained about $3.7 billion in cash from selling most of its stake in aircraft- lessor AerCap Holdings NV, and more than $400 million from exiting most of its Springleaf Holdings Inc. investment.
“We’ve got work to do to divest things that don’t fit well within our vision of the company,” Hancock said on Tuesday.
–With assistance from Selina Wang in New York.