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Tossing leaders, units overboard may not right AIG's ship

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American International Group Inc.'s announcement that four senior executives would be leaving the company only days after it announced the sale of a portion of its holdings in Chinese insurer PICC Property & Casualty Co. Ltd. may not get to the root of some of the insurer's core problems, say some analysts.

AIG President and CEO Peter Hancock on Thursday announced a major management reorganization. As part of the change, Chief Financial Officer David Herzog and John Doyle, CEO of commercial insurance, are among several top executives who will leave the company, which last month announced a $231 million loss for the third quarter. Mr. Herzog is retiring next year, and Mr. Doyle and the other executives will leave after a transition period, according to the company.

During a third-quarter earnings call in November, Mr. Hancock said the company would slash 23% of its senior staff of 1,400.

The announcement came as investor Carl Icahn called for AIG to be broken up into three separate companies — property/casualty, life and mortgage insurance — to enhance stockholder value.

Three days before the management reorganization announcement, AIG announced that it would sell part of its stake in PICC for about $751.8 million.

The management shuffle drew a mixed reaction.

AIG is “clearly serious about cutting the executive ranks and making changes,” said Paul Newsome, managing director at Sandler O'Neill Partners L.P. in Chicago.

But “to a certain extent, we should recognize this isn't terribly unusual” because changes in the executive ranks often are made when a new CEO is chosen. That didn't happen immediately when Peter Hancock became CEO of AIG in 2014 upon the retirement of Robert Benmosche, Mr. Newsome said.

“While sometimes companies need a change in their leaders, and it could prove a positive change, if this means nothing else — this abrupt change in leadership appears to confirm exactly what we've been saying in bold, capital letters: that say what they like about their strategy, AIG's operating turnaround simply has not been working,” said Josh Stirling, a senior analyst at Sanford C. Bernstein & Co. L.L.C. in New York, in a note issued last Thursday.

Another analyst said the sale of it shares in PICC didn't address the company's bigger problems.

“CEO Peter Hancock described the sale as de-risking AIG's PICC P&C position and improving its financial flexibility, but to us, this move looks more like a response to investor pressures than to internal risk management strategies,” said Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. in Baltimore, in a research note. Mr. Shields said the sale “isn't really a big deal either way.” He added that “we view the current focus on selling or spinning pieces of AIG as much less valuable than the (admittedly drastic) decisions needed to repair its underperforming P&C business.”