Posted on 04 Aug 2009
Industry experts are saying that American International Group's rebranding of its major property/casualty businesses as Chartis is probably a good move, but any positive impact in the marketplace will take time.
"They are crossing a threshold, in that at this point they now have gotten their own identity and a new brand," said Daniel Ryan, a vice president in the property/casualty ratings division of A.M. Best Co. "It's a step in the right direction. It moves them further away from the AIG brand, which has become a tainted name."
AIG's customers are more discerning than to be influenced by a name change, Ryan said.
"You're not going to see a whole lot of change externally, in the marketplace, over the next year or two. They sell more to the savvy insurance purchaser, not just the guy in the street who a year ago might not even have known who AIG was," he said. "These folks are very attuned to what's going on. I doubt that from day one it's going to affect what's going on in the marketplace. Our consensus would be that it does not."
Chartis will need to show real strategic changes to change perceptions in a sophisticated marketplace, even if the need to rebrand is immediate, said David Urban, interim dean of the Virginia Commonwealth University School of Business.
"If AIG is used as a replacement term for insurance failure or bailout or something else that conjures a negative image in the mind of the consumer, then they're probably better off trying to go in a different direction," Urban said.
But he warned that successful rebranding efforts typically require "not just changing a name, but everything associated with the problems."
"If all they're doing is rebranding the company, by changing the name and maybe a logo, that's probably not going to do them a whole lot of good in the long run," he said. "The company ultimately will be unsuccessful in changing its image."
The greatest initial effect may be internal, Ryan said. AIG has seen a number of senior executives leave, and the company must build morale and retain key people in its operating companies.
"In that respect, internally, their employee base, I think it helps them in terms of setting the stage that this new organization is on the road to separation," he said. "I think that will help with retention."
AIG unveiled the Chartis brand on July 27, establishing a special purpose vehicle to hold its equity. It replaces AIU Holdings, which AIG initially created to hold its Commercial Insurance, Foreign General Insurance, and Private Client groups.
AIG entered into agreements with the Federal Reserve Bank of New York in June to take equity stakes totaling $25 billion in separate SPVs created to hold the equity of American International Assurance Co. Ltd. and American Life Insurance Co.
That equity reduces AIG's debt under its federal bailout program, which has kept the insurer solvent since it nearly fell into bankruptcy in September and which now totals up to $182.5 billion in loans and other aid.
AIG may seek to sell up to 20% of the equity in each of the three SPVs through private investors, initial public offerings of stock or both.
How the three corporate entities, with their own boards of directors, will interact with AIG is uncertain, said Jennifer Marshall, an A.M. Best senior financial analyst.
"For at least the near- to medium-term, AIG is going to continue to be the majority owner of these organizations," Marshall said, and how they interact "is something that AIG has to consider."
Most AIG insurance companies currently have a Best's Financial Strength Rating of A (Excellent) with a negative outlook.