American International Group Inc.’s Peter Zaffino drew a clear line ahead of his jump to the insurer almost three years ago.

“I didn’t want any advice,” Zaffino, AIG’s president, said in a rare sit-down interview. “I needed to see things for myself,” he added. “You just have to get underneath, business review after business review.”

Several executives have tried to fix AIG in the past decade, and opinions abound over what’s needed to restore the vaunted status the insurer once boasted. Zaffino left a lucrative spot at Marsh & McLennan Cos. to join a longtime mentor, Chief Executive Officer Brian Duperreault, for one of the greatest–and most closely watched–challenges in the insurance market.

Zaffino, 53, has climbed AIG’s ranks and is now taking on its next big project–a sweeping effort to modernize the firm–just as it faces what insurance titans including Duperreault are calling the biggest catastrophe ever. Zaffino’s challenge of turning around AIG has taken on a stark new urgency.

“I feel really good about the work that’s been done and, quite frankly, if Covid-19 had happened a year ago, we wouldn’t be able to do what we’re doing today because we would not have had as much foundational work done,” Zaffino said in a video call last month.

AIG holds an unusual place in the insurance industry, known for taking big, unique risks under the formidable Maurice “Hank” Greenberg. That approach fueled AIG’s growth into the world’s largest insurer, and then ultimately to a $182.3 billion bailout in the financial crisis. Since then, the company has struggled to get back on its feet, hurt in part by the sale of some crown-jewel businesses to help repay taxpayers.

Icahn Pressure

More recently, the company was involved in a tumultuous dust-up with activist investor Carl Icahn. CEO Peter Hancock resigned in 2017, and the board hired Duperreault as his replacement, gaining a well-respected leader who helped ease the pressure from Icahn. Duperreault’s return to AIG, years after working under Greenberg, was tinged with emotion: “The heart said you have to,” he said in an interview.

“I didn’t want any advice. I needed to see things for myself. You just have to get underneath, business review after business review.“

“That relationship where you’ve got the macro, calming influence of a Duperreault, and the tactical and strategic tenacity of Peter works well,” said Kevin O’Donnell, president and CEO of RenaissanceRe Holdings Ltd., which has worked with AIG. O’Donnell first crossed paths with Zaffino in the mid-1990s at New York University’s business school.

AIG Outsider

Zaffino was something of an outsider, having not previously worked at AIG. But his recruitment, months after Duperreault’s hire, was practically inevitable given the task at hand, according to industry insiders.

“I recognized in my heart of hearts that ultimately the notion of going to work for Brian in a turnaround situation in one of the bellwether companies in the industry was going to be pretty irresistible for Peter,” said Marsh & McLennan CEO Dan Glaser, Zaffino’s former boss.

The turnaround hasn’t been easy. AIG has missed analysts’ estimates eight times in the past 12 quarters. Duperreault said in an interview that, when he arrived, he found that the insurer, which boasts a sprawling operation that writes policies for corporations, was taking on too much risk.

Trying to quickly change course for an insurer with a $30 billion market capitalization is difficult. Some contracts take years to adjust, and a decision to cut risk or raise prices may mean the business loses a customer. Zaffino works well in such complex situations, said Timothy Gardner, a former colleague who’s now CEO of Lockton Global Re.

“If it’s a status-quo business where you might be polishing an already incredibly shiny marble, he’d be good at it, but he’s best when the situation presents a challenge,” Gardner said.

Through the Wringer

Zaffino and his boss inherited a workforce that’s been through the wringer. Years after the financial crisis, AIG was still cutting jobs under its last CEO. Duperreault is the company’s seventh CEO since 2005. And the firm has been going through waves of shrinking for over a decade, with headcount falling each of the last four years.

“Companies tend to not want to go through change and, even though AIG’s been through a lot, the company’s unbelievably good at adapting,” Zaffino said in the sit-down interview in New York in February, before the city went into coronavirus lockdown.

“The appointment of Brian really gave creditability to a strategy that people could buy into, and I think the hire of Peter Zaffino just reinforced the intent,” Lloyd’s of London CEO John Neal said.

Coronavirus Pandemic

Recently, AIG has been dealing with a coronavirus outbreak that has hit its results and its people — several employees have tested positive. The company booked about $272 million in pandemic-related costs in the first quarter, tied to business lines including travel and workers’ compensation. Yet Zaffino detailed on an earnings call last month how the overwhelming majority of its business-interruption coverage, a key focus during the crisis, excludes losses from viruses, sending shares up that day.

The business-travel standstill has actually provided some help to Zaffino’s team working on the modernization effort, called AIG 200, with members able to meet more frequently, he said.

“Whenever you can have two senior executives that work in harmony and are moving that huge ship forward, you want those two to do it as long as possible.”

Patrick Ryan, Ryan Specialty Group

“Life changed immediately,” Zaffino said.

Zaffino and colleagues worked their way out of the building after the second plane hit it, and eventually got away from the site. He walked to 125th Street to make it back to Connecticut and his family. Marsh & McLennan–Guy Carpenter’s parent company–lost 295 employees and 63 consultants that day.

Memorial Services

The tragedy roiled insurance markets, including the one for workers’ compensation policies, requiring Zaffino and his colleagues to help clients get a handle on their exposures. For years after 9/11, Zaffino would make sure Marsh & McLennan employees around him never missed company memorial services, according to a former colleague who asked not to be named.

Zaffino’s career, which also included stints at Hartford Financial Services Group Inc. and a General Electric Co. venture called Core, has taken him to all corners of the industry, from reinsurance and brokerage work to insurance carriers. A former Boston College soccer player, he’s always had an determined focus on his work, former colleagues say.

That makes him thoughtful but unemotional when working on deals, and he doesn’t get rattled by outside noise around negotiations, according to Jimmy Dunne at Piper Sandler Cos. Zaffino has a reputation as an intense leader who requires employees to know an issue inside and out, and demands accountability daily, an ex-employee said. Former colleagues such as Gardner found the demands fair.

‘It’s Intense’

“I don’t know that you can ask much more than if your boss is working harder than you are, and yet asking a lot of you. That doesn’t seem like an unfair ask,” Gardner said. “It’s not easy and it’s intense, but it ends up pushing you to a point where he certainly makes you better.”

Insurance is a family affair for the Zaffinos. His father, Salvatore, who died earlier this year, ran reinsurance firms for decades. His brother Jonathan Zaffino joined insurance firm Ascot in April from Everest Re Group Ltd. David McElroy, who runs the North American portion of AIG’s property-casualty business, is married to Jonathan Zaffino’s wife’s sister.

Earlier in his career, Peter Zaffino was handed the job of running Guy Carpenter, following in his father’s footsteps. While Salvatore Zaffino was a “legend,” Peter brought a different approach to the business, said Charles Davis, CEO of Stone Point Capital LLC, a private equity firm that once was part of Marsh & McLennan.

“Things are different now than they were 25 years ago. Now the need for data analytics and real deep analysis is much greater than it was in Sal Zaffino’s day,” Davis said. “Peter’s more analytical and data-driven.”

Stacks of Data

At Marsh & McLennan, Zaffino could be seen striding around the office with stacks of oversize pages printed with financial figures and key data, former colleagues said. Zaffino says he relished all the data he had on those sheets, which helped him decide whether to accelerate the business or slow things down.

“I miss those statements dearly,” he said. “The information was very good and it gave me unbelievable insight.”

When he’s not working, Zaffino spends time with his family, plays golf and listens to music–he’s a Led Zeppelin fan and has gone to Bob Seger concerts with his kids. He and his wife, Kirsten, are travel aficionados and have been ardent supporters of the hockey and lacrosse teams their children have played on. Like Peter, Kirsten was a college athlete–a swimmer, in her case.

Deputies Groomed

While it remains to be seen whether Zaffino becomes AIG’s CEO, Duperreault has been known to groom key deputies to eventually take over. At Ace Ltd., now called Chubb Ltd., Duperreault was succeeded by key lieutenant Evan Greenberg, who still runs the firm. Years later, Marsh & McLennan named Glaser, who was group president and chief operating officer, to replace Duperreault.

For now, AIG’s benefiting from the partnership of Duperreault and Zaffino, according to Pat Ryan, who leads brokerage Ryan Specialty Group and founded Aon Plc.

“Whenever you can have two senior executives that work in harmony and are moving that huge ship forward, you want those two to do it as long as possible,” Ryan said.

There are signs of a turnaround taking hold. AIG notched an annual underwriting profit at its property-casualty business in 2019, a rarity for the insurer in recent years. Industry leaders, including Aon CEO Greg Case, say the company’s starting to get its swagger back. But on that February day in Manhattan, Zaffino acknowledged how quickly everything can transform.

“There are so many things that are going to be coming our way in the future that we’re not even contemplating that could mean enormous changes to the world,” he said.