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American International Group Inc.'s management reorganization shows President and CEO Peter Hancock wants to put his stamp on the insurer and is serious about making significant cost cuts, market analysts said Thursday.
AIG announced a new leadership team earlier Thursday.
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.
During the third-quarter earnings call, 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.
Thursday's announcement shows that 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.
Mr. Benmosche died earlier this year.
Mr. Newsome said many of the new executive team members are unfamiliar names to investors, which means that AIG will have to do some rebuilding of its reputation to be seen as having a senior management team with depth.
“I think the CFO departure was a little bit surprising,” said Mark Dwelle, an analyst at RBC Capital Markets L.L.C. in Richmond, Virginia. “Mr. Herzog has been there for a while, he's served under a number of CEOs and he was generally liked by the Street.”
AIG said Mr. Herzog would retire after the filing of the company's 2015 Form 10-K with the Securities and Exchange Commission in the first quarter of 2016.
“I think most of the rest (of the executive team plan) is kind of consistent with the program. There's usually an element of management reorganization when you embark of on a restructuring of the magnitude they've embarked on,” Mr. Dwelle said.
James Auden, managing director of insurance at Fitch Ratings Inc. in Chicago, said statements AIG made during the earnings conference call indicated that “quite a few members of senior management would be departing. They have a few key targets they were trying to hit down the road, and one of those was expense reduction. So this is part of that process and we may learn more down the road.”
American International Group Inc. continues to be a company under siege, both from its own shareholders and from the analyst community, as the company tries to reverse its faltering fortunes.