7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 1/16
AIG – Management Vs. InvestorsName: Grant KalilDate: 19.02.2016
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 2/16
Case Overview
2/21/16 Kalil 2
Question: Was it smart for AIG to ommit to ret!rnin" #2$ %illion to s&are&ol'ers(
Answer: It 'e)en's on lon" term strate"* of om)an*
Case
Case Structure
Case Background Available strategies Answer
AIGOverview
In'!str*Overview
+ri""er
,ana"ement -trate"*
Investor -trate"*
Al)&a%et -trate"*
-ol!tion
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 3/16
Background: Industr! AIG and t"e #rigger
2/21/16
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 4/16
Ins!rane In'!str* Overview
2/21/16 Kalil
Market #raits
!*er ower -i"nifiant for lar"e
or)orations
ivalr*3i"& as ins!rane seenas ommo'it*
$on % Market #raits
-I4I Non%an5 -I4I
Cre'it ratin" 7tremel* im)ortant
&isk Aggregation Business
Well mana"e' ris5 8 Client onfi'ene
is5 mana"ement t&ro!"&:'iversifiation reins!rane li!i'it*
Business Model
rie ris5 an' &ar"e )remi!m for it
Interest earnin"s an' reven!es
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 5/16
AIG ; Com)an* Overview
2/21/16 Kalil $
AIG
201:#6.%neven!e
-&are
rie:#$1<2
O:∼=>
#$16%n Assets
201$
-3 ret!rns:#12%n
Deferre'
+a7 Asset:#19.$%n
+ra'in" at ∼0>
'iso!nt to %oo5val!e
eer "ro!)O 8 10>
'n"a((Investors
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 6/16
+ri""er: Conflit %etween Investors an' ,ana"ement
2/21/16 Kalil 6
O)en letter fromativist investor Ia&n
?#2$%n@ es)onsefrom mana"ement
Investorsa''e' to %oar'
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 7/16
Strategic )(tions Available to AIG
2/21/16 =
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 8/16
O)tions availa%le to AIG
1. ,ana"ement -trate"*
2. Ativist Investor -trate"*
. ,er"erB wit& Al)&a%et
2/21/16 Gro!) $ <
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 9/16
,ana"ement -trate"* ; Inremental
2/21/16 Kalil 9
Management
-trate"i
Or"anisationalO)erational
&eturn *+,bn over twoears to s"are"olders
Divest!res ; No &ol* ows
201=: &)- /01
9 ,o'!lar %!siness !nits
-)lit )ortfolios O)eratin" ?#$6%n@ Ee"a* ?#=%n@
7)ense re'!tions*/.2bn
Im)rove FC%!siness ?#2%n@
O "oal !nrealisti Con"lomerate 'iso!nt Inentive )lans Onl* inremental &an"es
Investor Issues
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 10/16
Investor -trate"* ; Drasti -trate"i -&iftB
2/21/16 Kalil 10
-maller sim)ler
,etEife e7am)le
4o!s
OH10>
+rans)aren*
,oral&aar'
Costs
Investor
De-I4I
!re la*FC
-treamlineO)erations
A''.Dislos!res
O %ase'inentives
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 11/16
2/21/16 Kalil 11
Investor
De-I4I
!re la*FC
-treamlineO)erations
A''.Dislos!res
O %ase'inentives
-O+ anal*sis s&ows %rea5 !) onl*
sli"&tl* val!e a''in"?*,3.,4 vs. *,/.5+@
Cre'it atin" w/o 'iversifiation
Cost to %rea5 !) om)an* %eforemo'!larisation
Eoss of 'eferre' ta7 asset
Management Issues
Investor -trate"* ; Drasti -trate"i -&iftB
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 12/16
,er"erB wit& Al)&a%et ; ,oon s&ot
2/21/16 Kalil 12
4inte&-*ner"ies
Ea% ofinnovation
e'!eCosts
+e& Ins!rane5now&ow
i" Data C*%er ins!rane
4!t!re of 4inte& Driverless ars
Jse Goo"les te&5now&ow to streamline %!siness
artner wit&Investment
an5
3an'le volatilit* ofins!rane laims
C!lt!re i" fis& to swallow
&isk
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 13/16
AIG O)tions +imeline
2/21/16 Kalil 1
/. Combine Management andInvestor Strategies +. Moon s"ot wit" Al("abet
,ana"em
ent
-
trate"*
2016
201<In
vestor
-
trate"*
2020
Stabilise
)(timi6e
,o'!larisation
+rans)aren* Cost re'!tion
O im)rovement
Divest
4o!s
De-I4I
Cre'it atin"
,er"e wit& Al)&a%et
,er"e -*stems
Create Innovation Ea%
4inte& Kin"
2016
201=
201<
2020
Define s*ner"ies
O)timie
Data minin"
C*%er se!rit* lea'er
Driverless ars
##########
2019
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 14/16
Case Answer
2/21/16 1
7/24/2019 Was AIG smart in promising its Shareholders $25bn returns?
http://slidepdf.com/reader/full/was-aig-smart-in-promising-its-shareholders-25bn-returns 15/16
#2$%n Commitment smart( It De)en's
2/21/16 Kalil 1$
/. Combine Management andInvestor Strategies
+. Moon s"ot wit" Al("abet
*+,bn 7A8)'# 9 SMA&#
romise' )a* o!t
8
reat&in" room in s&ort r!n
8
+ime to s!staina%l* o)timie
romise' )a* o!t
8
Inrease in om)an* val!ation
8
Eess attrative mer"er )artner
*+,bn 7A8)'# 9 'MB
Top Related