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Transcript

Peter Zaffino · The David Rubenstein Show

0:02
Speaker 1: For many years, the most successful insurance company in the
0:05
Speaker 1: world was AIG, and then the Great Recession came and
0:08
Speaker 1: AIG required a one hundred and eighty three billion dollar
0:11
Speaker 1: bailout from the US government. That bailout has now been
0:14
Speaker 1: repaid with interest and AIG is reshaped into a smaller
0:18
Speaker 1: but very successful insurance company being led by Peter Sofino.
0:22
Speaker 1: I had a chance to sit down with Peter and
0:23
Speaker 1: his offices in New York to talk about the new AIG. So,
0:27
Speaker 1: for those who aren't familiar with property and casualty insurers,
0:30
Speaker 1: what do they really do well?
0:31
Speaker 2: We ensure businesses small, medium, large commercial businesses for their
0:36
Speaker 2: property insurance or their auto or financial lines, which is
0:40
Speaker 2: directors and officers. And we also have a business that
0:42
Speaker 2: does harder to place business you know, such as like
0:47
Speaker 2: you know, contractors or you know, businesses that may not
0:50
Speaker 2: find its way into the conventional business. And we also
0:52
Speaker 2: have a Lloyd syndicate and we're a big part of
0:55
Speaker 2: Lloyd's as well.
0:56
Speaker 1: So as I understand the insurance business, they're really two
0:59
Speaker 1: parts to it. One is the part of assessing the
1:01
Speaker 1: risk and charging premiums that hopefully will for the maturest
1:05
Speaker 1: point of view, cover the risk, and the second is
1:07
Speaker 1: taking those premiums and investing it and hopefully getting a
1:10
Speaker 1: good way to return. So let's talk about the first part.
1:13
Speaker 1: So in the first part of assessing risks, is it
1:16
Speaker 1: harder today because inflation is so high to assess the
1:19
Speaker 1: risk that you might have in ensuring somebody's home or
1:22
Speaker 1: property at.
1:23
Speaker 2: A property and casualty company. It's much more complicated to
1:26
Speaker 2: get the underwriting right than it is the investment side.
1:29
Speaker 2: And you're right, with inflation, the complexity of cyber risk
1:33
Speaker 2: today and other factors such as global warming, catastrophes, you know,
1:40
Speaker 2: the dynamic of what happened after the pandemic with density
1:43
Speaker 2: and peak zone areas such as Florida, California. So understanding
1:47
Speaker 2: your balance sheet and your aggregates with what you're underwriting
1:52
Speaker 2: is complicated. You need people with a lot of experience
1:54
Speaker 2: and a lot of you know, good judgment in terms
1:56
Speaker 2: of making underwriting choices.
1:58
Speaker 1: If somebody says climate change does not really hear, they
2:02
Speaker 1: haven't talked to a property and casually ensure I gess right.
2:05
Speaker 2: That's corrected, then that is true. Five out of the
2:07
Speaker 2: last six years, we've had over one hundred billion dollars
2:10
Speaker 2: of natural disaster losses in our industry that's never happened before.
2:13
Speaker 1: What about artificial intelligence is artificial intelligence is going to
2:16
Speaker 1: enable you and others to say we have enough information
2:19
Speaker 1: to know exactly what something is going to be worth
2:22
Speaker 1: there in terms of ensuring it or not.
2:24
Speaker 2: Artificial intelligence is finding its way into our business in
2:26
Speaker 2: a variety of different factors. I think the first piece
2:28
Speaker 2: is getting much better insight into data, which allows us
2:32
Speaker 2: to make better decisions on underwriting. It's also a great
2:35
Speaker 2: opportunity to service business better in terms of like call
2:39
Speaker 2: centers and different ways of what's using robotics and other
2:41
Speaker 2: AI will be very helpful. But it is an emerging
2:46
Speaker 2: practice within the industry and one that is evolving very quickly.
2:49
Speaker 2: So it's also going to present risks that you know
2:52
Speaker 2: other companies how they use it and how they use
2:55
Speaker 2: large language models and making sure the decision making is
2:58
Speaker 2: very sound. So it's complicated, but definitely is benefiting the
3:01
Speaker 2: business today.
3:02
Speaker 1: Now, the insurance industry has a reputation maybe undeserved. For
3:06
Speaker 1: let's say somebody has a claim their house burned down
3:09
Speaker 1: or something, and the insurance adjuster comes out and says, well,
3:12
Speaker 1: it really wasn't worth as much as you think, or
3:13
Speaker 1: the damage wasn't as great. Is that a big problem anymore?
3:16
Speaker 1: Or is that an unfair image?
3:18
Speaker 2: I think it's an unfair image. I think it probably
3:20
Speaker 2: perhaps is true you know years ago, but today you
3:24
Speaker 2: know the contracts are you know much more? You know clear,
3:28
Speaker 2: you know paying claims.
3:29
Speaker 1: That's what we do.
3:30
Speaker 2: I mean, we underwrite risks, but you know when we
3:31
Speaker 2: have to show up in moments of matters in terms
3:33
Speaker 2: of how we pay our claims, and the amount of
3:36
Speaker 2: disputes are very small as a percentage of our overall portfolio.
3:39
Speaker 2: And I don't think that that's a fair assessment.
3:41
Speaker 1: So when you make a judgment that you're going to
3:43
Speaker 1: charge somebody a certain premium, you think that you'll probably
3:46
Speaker 1: make a little profit or some profit on the premium,
3:48
Speaker 1: and generally you are you doing that now?
3:50
Speaker 2: Yes? I mean you know that's not been AIG's passed.
3:53
Speaker 2: From two thousand and nine to twenty nineteen, it lost
3:56
Speaker 2: over thirty billion dollars in underwriting and so coming I
4:00
Speaker 2: arrived in twenty seventeen with a great team that followed
4:03
Speaker 2: me here and we began that underwriting journey, and so
4:07
Speaker 2: now we do make underrunting profits. So for every dollar
4:09
Speaker 2: we underwrite risk, you know, we make around you know,
4:13
Speaker 2: ten to twelve cents of profit without the investment income.
4:15
Speaker 1: Let's talk about the investment income. So you bring in
4:18
Speaker 1: these premiums and all insurers then invest it and you
4:21
Speaker 1: get great and people do invest it, I assume for you.
4:23
Speaker 1: So what kind of return are you looking for on
4:26
Speaker 1: your investment portfolio.
4:27
Speaker 2: Seventy five percent of the portfolio tends to be fixed income,
4:30
Speaker 2: and so in this new interest rate environment, actually the
4:32
Speaker 2: investment income is going up, and then the remaining portion
4:35
Speaker 2: will be in some form of alternative investments, such as
4:39
Speaker 2: private equity or commercial real estate. And that's done very conservatively.
4:44
Speaker 2: But we really are not going to win on just
4:47
Speaker 2: the investment income. You really need to make an underwriting profit.
4:50
Speaker 2: So we balance both, you know, very well.
4:52
Speaker 1: So I should say private equity. My own firm does
4:55
Speaker 1: have a relationship with AIG. So of course you can't
4:58
Speaker 1: put more too much money in private decay, right, Your
5:00
Speaker 1: investment professionals can't put too much money in that area.
5:02
Speaker 2: Right, Absolutely, they do a great job.
5:04
Speaker 1: So in terms of the investment return, though generally are
5:08
Speaker 1: all insurers now basically making money both on investment return
5:12
Speaker 1: and on premium underwriting? Is that? But basically the core
5:15
Speaker 1: of the.
5:15
Speaker 2: Business, generally speaking, the industry is making underrunning profit on
5:18
Speaker 2: it's underwriting, and it's on the investment side as well.
5:22
Speaker 1: So it's often said that Lloyd's of London, which would
5:25
Speaker 1: ensure almost anything. So are there things that you won't
5:28
Speaker 1: ensure If somebody comes to you and says I'm worried
5:30
Speaker 1: about my wedding being rained out or something like that,
5:34
Speaker 1: is there any kind of insurance that you won't provide.
5:36
Speaker 2: Yeah, we are very specific in terms of what we
5:39
Speaker 2: want to underwrite. I mean it has to be where
5:41
Speaker 2: we have skill, where we can deploy capital and get
5:43
Speaker 2: a fair return. So we don't really reflect the way
5:46
Speaker 2: Lloyd's can ensure almost anything. It's much more, you know,
5:50
Speaker 2: a traditional specialty company that would have real strong expertise
5:55
Speaker 2: in scale in the areas that we underwrite.
5:58
Speaker 1: So housing insurance is a big part of your business,
6:01
Speaker 1: I assume, So what is the biggest risk for you
6:04
Speaker 1: in providing insurance of people's homes.
6:06
Speaker 2: Well, the complexity has been the density built up in
6:10
Speaker 2: areas that have significant exposure if you think about the
6:13
Speaker 2: southeast of the United States, for wind or wildfire in California,
6:17
Speaker 2: what happened as a effect of the pandemic is that
6:21
Speaker 2: you know, people were moving into those areas, and you know,
6:24
Speaker 2: I'll make it up, but you know, a two and
6:25
Speaker 2: a half million dollar house costs five million during the pandemic,
6:29
Speaker 2: and people knocked down and put up a ten. So
6:31
Speaker 2: all of a sudden, you had all this density in
6:33
Speaker 2: areas that were already challenged to have enough insurance to
6:37
Speaker 2: be able to respond to the individual homeowners. So I
6:39
Speaker 2: think it's just become more complex. Add in you know,
6:41
Speaker 2: more frequency of hurricanes and wildfire, and you just have
6:45
Speaker 2: a market that is under a little bit of stress.
6:48
Speaker 1: And property and casualty that is separate than automobile insurance.
6:52
Speaker 1: An auto would go into you do auto and bill insurance? Yes,
6:55
Speaker 1: And is that a risky business to be in these days?
6:57
Speaker 1: Or drivers getting better? Or what about people that supposedly
7:01
Speaker 1: don't have cars that don't have drivers. Are you worried
7:03
Speaker 1: about that?
7:04
Speaker 2: I am worried about that. I mean, you know, driverless
7:06
Speaker 2: vehicles are a big exposure, but but I think that
7:09
Speaker 2: you know, with AI quality of vehicles it's more predictable
7:13
Speaker 2: than perhaps it was in the past.
7:15
Speaker 1: So for your own home, who provides home insurance for you?
7:19
Speaker 1: Ai g oh? And if you have a claim, do
7:22
Speaker 1: you have any problem getting it paid?
7:23
Speaker 2: Or I haven't had a claim, but I rather claim
7:25
Speaker 2: I think I don't think I would.
7:27
Speaker 1: Let's talk about how you got into the insurance business.
7:29
Speaker 1: So your father was in the business, and did he say, Peter,
7:34
Speaker 1: when you grow up, you should go in the insurance business.
7:36
Speaker 1: Is that what happened?
7:37
Speaker 2: No, you didn't. I mean the myth of him, you
7:39
Speaker 2: know reading the insurance and reinsurance books at night is
7:42
Speaker 2: not true. He always encouraged me to do and pursue
7:45
Speaker 2: what I wanted. And quite frankly, I went to you know,
7:47
Speaker 2: Boston College, graduated, and the reason why I want to
7:51
Speaker 2: enter the insurance industry was I wanted to stay in
7:53
Speaker 2: Boston and a company called the Hartford that was owned
7:56
Speaker 2: by it T at the time, did offer me a
7:58
Speaker 2: job if I would do training elsewhere to come back
8:01
Speaker 2: to Boston, And so that was the reason I took
8:03
Speaker 2: the job.
8:04
Speaker 1: Now, some people might say that insurance is a boring business.
8:06
Speaker 1: It doesn't attract people the way private equity does. But
8:10
Speaker 1: is that not the case or you found that to
8:11
Speaker 1: be interesting even right out of college.
8:13
Speaker 2: Now I find it very interesting. I mean you're not
8:15
Speaker 2: doing the same thing all the time when you start
8:16
Speaker 2: in the industry. I mean you're learning to build relationships,
8:19
Speaker 2: You're understand the quantitative nature of how to underwrite and
8:23
Speaker 2: also the qualitative nature. So I liked it because I
8:25
Speaker 2: had a balance of doing different things at once.
8:28
Speaker 1: So what did you do after your first job in Boston?
8:31
Speaker 2: Well, that's ironically I never made it back to Boston,
8:34
Speaker 2: and so that's I stayed in New York. And early
8:39
Speaker 2: on in my career I didn't think I could really
8:41
Speaker 2: work in New York City, which has been, you know,
8:43
Speaker 2: the predominant portion of my career. So I've always been
8:47
Speaker 2: in big companies. Worked at ITT and then I worked
8:49
Speaker 2: at General Electric and Marsh mcclennan after that.
8:53
Speaker 1: All right, So you were working at Marsh mcclennan on
8:56
Speaker 1: September eleventh of two thousand and one, and where were
9:01
Speaker 1: you on that morning?
9:02
Speaker 2: That morning? So was my sixth day of work at
9:05
Speaker 2: Marsh McLennan, and I was on the fifty third floor
9:08
Speaker 2: of Tower two that day to work and so what happened.
9:13
Speaker 2: The first plane went into Tower one. I had seen it,
9:17
Speaker 2: and so colleagues and I started to evacuate, nothing urgent,
9:21
Speaker 2: but into the stairwell to make our way down and
9:25
Speaker 2: made it to about the fortieth floor when the second
9:27
Speaker 2: plane went into the building, which I didn't know what
9:30
Speaker 2: it was at the time. I'd figured either Tower one
9:33
Speaker 2: had tipped over or something else had come into the building.
9:35
Speaker 2: And you know, we had a sense of urgency.
9:38
Speaker 1: Of getting was there a mass rushed down the stairways.
9:41
Speaker 2: There was, I mean it was orderly, but it was
9:43
Speaker 2: started to get panicky of trying to get out of
9:45
Speaker 2: the building and rush our way down the stairwell.
9:48
Speaker 1: So you got out of the building how much before
9:50
Speaker 1: the building collapsed.
9:52
Speaker 2: I was probably twenty minutes, you know, north of the
9:55
Speaker 2: building when it collapsed. I was never in danger of
9:58
Speaker 2: you know, having soot or or other things on me
10:01
Speaker 2: once the building collapsed.
10:02
Speaker 1: But as soon as you got out of the building,
10:04
Speaker 1: you didn't look up there and say, oh, I see
10:06
Speaker 1: what it's going to survive you You ran somewhere.
10:08
Speaker 2: Yeah, No, I'm actually met a friend and we happened
10:11
Speaker 2: to you know, we walked north to one hundred and
10:14
Speaker 2: twenty fifth Street over the course of the day to
10:16
Speaker 2: get out of the city.
10:17
Speaker 1: And how many of your colleagues died Almost three hundred
10:21
Speaker 1: that day, three hundred colleagues died from Marsh mcclennanth. Yes, okay,
10:24
Speaker 1: So you didn't get out of that and say I've
10:26
Speaker 1: had enough of Wall Street, I've had enough of insurance.
10:28
Speaker 1: I'm going to go into something else. Now.
10:30
Speaker 2: It's a unique part about our business is that, you know,
10:33
Speaker 2: in you know, major disasters or you know, things that
10:36
Speaker 2: happened like that, you know, our clients need us, and
10:39
Speaker 2: you know, so it was immediately you know, calibrating, focusing
10:42
Speaker 2: on helping you know, I was in the reinsurance business
10:45
Speaker 2: at that time, so helping insurance companies, you know, get
10:48
Speaker 2: back into business and helping raise capital and you know,
10:51
Speaker 2: helping them assess what they needed to do going forward.
10:54
Speaker 1: So today, AIG over the years has been a gigantic company,
10:58
Speaker 1: one of the largest, maybe the larger at one time
11:00
Speaker 1: market cap insurance in the world. But then during the
11:03
Speaker 1: Great Recession it had some problems and ultimately the government
11:07
Speaker 1: had to come in with a bailout. You could call it.
11:09
Speaker 1: One hundred and eighty billion dollar guaranteed loan or bailout.
11:13
Speaker 1: Have you paid that back yet?
11:15
Speaker 2: Yes, that's been paid back. You know, well before I
11:17
Speaker 2: arrived at the company.
11:18
Speaker 1: And did the government make a profit on that?
11:20
Speaker 2: They did, Yes, they made a profit. There was interest
11:22
Speaker 2: and a profit.
11:24
Speaker 1: So what caused that was basically too much insurance on
11:27
Speaker 1: I guess it was high risk mortgages.
11:30
Speaker 2: Yeah, it was a financial products product that had you know,
11:33
Speaker 2: credit related and so that you know, created a you know,
11:36
Speaker 2: impact on liquidity.
11:38
Speaker 1: So, Peter, when you took over as the CEO of
11:41
Speaker 1: this company, it wasn't as as good as shape as
11:43
Speaker 1: it appears to be now. So what did you do
11:45
Speaker 1: to turn it around? And what are you most proud
11:47
Speaker 1: of having achieved in your time as CEO so far?
11:51
Speaker 2: Well, the the thing I'm proud of the most is
11:53
Speaker 2: just the number of people that you know, came to
11:56
Speaker 2: AIG and actually people that stayed to come together as
11:59
Speaker 2: a organization to actually try and improve our underwriting, our
12:02
Speaker 2: operational capabilities and there in our financial performance. I mean,
12:05
Speaker 2: we had to shed relative to our balance sheet, one
12:08
Speaker 2: point four trillion dollars of exposure since we started, and
12:12
Speaker 2: so that was a dramatic change we had to do
12:16
Speaker 2: ten operational programs at once to get the foundation stability
12:20
Speaker 2: for the company for the future. And I actually think
12:22
Speaker 2: that part of the pandemic benefited us because we compressed
12:26
Speaker 2: that transformation and did it very fast and made dramatic
12:30
Speaker 2: improvements for the company. And then the financial performance started
12:32
Speaker 2: to really manifest itself from the efforts that we made
12:36
Speaker 2: on the underwriting side and the operation side. So it's
12:38
Speaker 2: just been a tremendous effort.
12:40
Speaker 1: As we've talked about this here now and pretty much
12:42
Speaker 1: in the P and C business, property and casualty, you're
12:45
Speaker 1: getting out of the life insurance business over time. But
12:48
Speaker 1: explain to me why the life insurance business wouldn't be
12:50
Speaker 1: a better business because you know, people are going to die,
12:53
Speaker 1: very predictable actual aries continue when they're going to die.
12:55
Speaker 1: Is why is that business not as good as the
12:57
Speaker 1: property and casualty business.
12:58
Speaker 2: Well, it's a very good business. The property and casualty
13:03
Speaker 2: businesses is totally different. I think the complexity in life
13:06
Speaker 2: insurance business is just you know, they have so much
13:09
Speaker 2: investment assets. It's a spread business and one that has
13:13
Speaker 2: really different, you know, dynamics that drive its outcomes.
13:16
Speaker 1: Now I see lots of ads on television for insurance,
13:19
Speaker 1: sometime home insurance, so forth. But I don't see a
13:21
Speaker 1: lot of AIG ads here you appealing to people like
13:24
Speaker 1: me who are watching television or you're going to institutional market.
13:28
Speaker 2: We have, you know, a distribution of agents and brokers
13:31
Speaker 2: that we're really a business to business and so we
13:34
Speaker 2: source our business through that distribution channel. So us advertising
13:38
Speaker 2: to you know, the end consumer has limited value in
13:42
Speaker 2: the products that we actually underwrite.
13:44
Speaker 1: So today, the insurance business, generally in the United States,
13:47
Speaker 1: would you say it's a reasonably healthy business today?
13:49
Speaker 2: I would. I think balance sheets are strong, I think
13:51
Speaker 2: the returns are are very good, and I think there's
13:54
Speaker 2: positive momentum.
13:55
Speaker 1: So you see a lot about what's going on the
13:57
Speaker 1: economy because you underwrite a lot of active is what
14:00
Speaker 1: is your biggest worry about the economy today or you
14:03
Speaker 1: think we're going to go into recession? Are you worried
14:04
Speaker 1: about inflation? High interest rates?
14:08
Speaker 2: I worry about it all. I mean, but you know,
14:09
Speaker 2: for insurance, I mean certainly inflation is one because of
14:12
Speaker 2: you know, we carry reserves for many years on our
14:14
Speaker 2: balance sheet, and you know what the effect is of
14:18
Speaker 2: inflation as we pay claims over the long term. You know,
14:21
Speaker 2: the investment rates, as I said, with fixed income, that's
14:24
Speaker 2: really strong for us in terms of reinvestment rates and
14:27
Speaker 2: so allows us to do very well on the investment side.
14:31
Speaker 2: And I do worry about the you know, global economy.
14:34
Speaker 2: You know, GDP has been holding up, but certainly like
14:37
Speaker 2: in the United States, I mean a big part of
14:39
Speaker 2: the GDP is healthcare and tech, and so seeing consumer
14:42
Speaker 2: spending and driving sales through retail is something that we watch,
14:46
Speaker 2: you know frequently.
14:47
Speaker 1: What percentage of your businesses or insurance overseas and what
14:50
Speaker 1: percentages in the United States.
14:52
Speaker 2: It's about fifty to fifty overseas and the United States.
14:54
Speaker 1: What are the number of employees you have now we.
14:56
Speaker 2: Have a little over thirty thousand employees at AIG and
14:59
Speaker 2: probably twenty thousand of you know, employee equivalents in terms
15:03
Speaker 2: of what we outsource through you know, a back office
15:06
Speaker 2: or through technology.
15:08
Speaker 1: And today your market capitalization is roughly forty five billion
15:11
Speaker 1: something like that. And today do you spend any time
15:15
Speaker 1: in Washington, d C. Saying to regulators you're not doing
15:18
Speaker 1: a good job regulating us, or you members of Congress
15:21
Speaker 1: do a better job and taking care of the debt repayment.
15:23
Speaker 1: Do you do you spend any time in Washington?
15:24
Speaker 2: I do spend time in Washington and spend time with lawmakers.
15:27
Speaker 2: I mean the complexity of insurance is that we're state
15:30
Speaker 2: regulated and so you know, spending time with various state
15:33
Speaker 2: regulators and you know FCA and FSA in the UK
15:38
Speaker 2: and Japan respectively, is where I spend more of my time.
15:41
Speaker 1: And do you find when you meet with members of
15:43
Speaker 1: Congress it's an uplifting experience.
15:46
Speaker 2: You know, getting compromise and talking through specific issues is
15:50
Speaker 2: more challenging than it's been in the past, but you know,
15:53
Speaker 2: we're trying to make progress now.
15:54
Speaker 1: You go to a lot of CEO gatherings, I assume
15:57
Speaker 1: your members of business, things like the business round Table,
16:00
Speaker 1: business counsel and things like that. When you talk to
16:03
Speaker 1: other CEOs, not just in your industry, what are they
16:05
Speaker 1: most worried about today? They political divisiveness in Washington, inflation,
16:10
Speaker 1: high interest rates. What do you think people are most
16:11
Speaker 1: worried about?
16:12
Speaker 2: I think those three always come up. And the geopolitical environment.
16:16
Speaker 2: I also think state sponsored you know, cyber attacks and
16:20
Speaker 2: what does that do to you know, a company all
16:23
Speaker 2: of that is getting a lot of attention, and I
16:25
Speaker 2: think it's doesn't matter what industry you're in, it has
16:28
Speaker 2: its impact. I think also global expansion, the resistance for
16:32
Speaker 2: you know, acquisitions and support you know for companies to
16:37
Speaker 2: be able to acquire you know, big businesses outside of
16:39
Speaker 2: the United States gets challenging as well.
16:41
Speaker 1: So as the CEO of this company, your biggest concern
16:44
Speaker 1: is always increasing the share price or providing good service
16:48
Speaker 1: to your customers. What do you worry about the most
16:51
Speaker 1: in terms of the job of being CEO.
16:53
Speaker 2: Well, it's a great privilege to be a CEO of
16:57
Speaker 2: a company like this, and we've been in a massive
16:59
Speaker 2: turnaround and so fortunate to have so many good people
17:02
Speaker 2: with me at at AIG. I think with I have
17:05
Speaker 2: the longest tenure of six years of all of my executives,
17:09
Speaker 2: and I think over sixty percent of our top one
17:12
Speaker 2: hundred are new to the company, and so like bringing
17:14
Speaker 2: that together to actually drive the outcomes that we have
17:17
Speaker 2: has been incredibly rewarding and taking as you said, there's
17:21
Speaker 2: short term you know demands on CEOs, but taking a
17:24
Speaker 2: long term view of a business and building foundational you
17:28
Speaker 2: know capabilities that are enable us to do much more
17:30
Speaker 2: for our clients over the long term. Adapting to AI
17:34
Speaker 2: and adapting to you know, a rapidly changing world is
17:37
Speaker 2: a high priority for me.
17:38
Speaker 1: So if the President of the United States called you
17:41
Speaker 1: and said, you know, you really know a lot about insurance,
17:43
Speaker 1: you know a lot about risk, why don't you come
17:45
Speaker 1: into the US government and help assess risk we have?
17:48
Speaker 2: You would say, what I'm better suited for a public
17:51
Speaker 2: company is what?
17:52
Speaker 1: Ever? So you're not probably going to go into the
17:54
Speaker 1: public sector anytimes.
17:55
Speaker 2: That probably is not in the cards for me.
17:57
Speaker 1: Well, as we talked today, there are lots of problems
18:01
Speaker 1: around the world. One of them is what's going on
18:03
Speaker 1: in Israel. Another one is what's going on in Ukraine.
18:06
Speaker 1: How do you assess those risks? For example, did you
18:08
Speaker 1: ever provide insurance to people in Ukraine?
18:11
Speaker 2: We did provide. We had a business in Russia, you know,
18:15
Speaker 2: prior to the Russia Ukraine conflict, we did not have
18:18
Speaker 2: a big business in Ukraine. But through you know, Lloyd's
18:22
Speaker 2: we did have exposure to some classes of business, you know,
18:26
Speaker 2: through the war. And so you know, assessing that is
18:28
Speaker 2: very complicated and one that you need to manage. You know,
18:32
Speaker 2: how much you're going to underwrite a specific class that
18:34
Speaker 2: could have, you know, political violence or a war or terrorism.
18:39
Speaker 1: So let's suppose I own a big factory, a semiconductor
18:43
Speaker 1: chip factory in Taiwan, and I come to you and say,
18:45
Speaker 1: you know, I just want to get some insurance against
18:48
Speaker 1: it possibility that China might invade and destroy or take
18:51
Speaker 1: over my plant. Is that the kind of thing you
18:53
Speaker 1: would do or that's too risky?
18:55
Speaker 2: That would be too risky. Yeah, I think that there's
18:57
Speaker 2: there's some portions of what we call violence you know coverage.
19:01
Speaker 2: But you know, in areas where we know that there's
19:04
Speaker 2: an exposure, it gets very hard to underwrite that, and
19:08
Speaker 2: so we would have very limited capacity to be able
19:10
Speaker 2: to do something like that.
19:11
Speaker 1: But you don't provide war insurance, then pretty much do
19:14
Speaker 1: you provide flood insurance. I have a home in Nantucket
19:17
Speaker 1: that's right on the water there, and I'm always worried
19:20
Speaker 1: when the flood's going to come. So can I get
19:22
Speaker 1: flood insurance or is that hard to get these days?
19:24
Speaker 2: It's hard to get. But we do provide flood insurance,
19:26
Speaker 2: as does the government.
19:27
Speaker 1: And what's the fastest growing area of insurance that people
19:30
Speaker 1: are for property and casual what are people most interested in?
19:33
Speaker 1: Just home insurance?
19:35
Speaker 2: Home insurance has been one of the more complicated ones,
19:38
Speaker 2: you know, across the United States. But I think, you know,
19:40
Speaker 2: one of the biggest growing areas is what we call
19:43
Speaker 2: access and surplus lines. It's a market that sits alongside
19:46
Speaker 2: the regulated market and that has been growing significantly across
19:51
Speaker 2: the industry as well as fraig.
19:54
Speaker 1: And what's been the biggest challenge for the insurance industry
19:56
Speaker 1: over the last five or ten.
19:57
Speaker 2: Years, I think it's understanding you know, these unpredictable risks
20:02
Speaker 2: of whether it was the pandemic, understanding what could happen,
20:05
Speaker 2: you know, with potential war breakout, but also you know,
20:08
Speaker 2: the climate change. As I said before, having that type
20:11
Speaker 2: of hurricane activity. We've had a hundred natural disasters reported
20:16
Speaker 2: through nine months of this year that that just hasn't
20:19
Speaker 2: happened in the past.
20:20
Speaker 1: So, if I am trying to learn the insurance business,
20:23
Speaker 1: what's the most important thing as an outsider wants to
20:26
Speaker 1: assess whether the industry is a good industry to invest in.
20:28
Speaker 1: What are the inndition that people like me should look at.
20:31
Speaker 2: I always think depending on how sophisticated the individuals looking
20:34
Speaker 2: at at companies, always the strength of the balance sheet,
20:37
Speaker 2: the consistency of performance is really important because if you
20:41
Speaker 2: end up getting a lot of surprises from catastrophes or
20:44
Speaker 2: you know, other variables, it's very hard to predict what's
20:47
Speaker 2: going to happen with that insurance company in the future.
20:49
Speaker 2: And then i'd look at the leadership in terms of,
20:51
Speaker 2: you know, their track record in you know, developing business
20:54
Speaker 2: that have sustainable, long term profitability.
20:57
Speaker 1: Now, the insurance business has been historically a very strong
21:00
Speaker 1: one of the United States. Are we still the leader
21:02
Speaker 1: in global insurance? Are there companies outside the United States
21:05
Speaker 1: that are even more significant now?
21:07
Speaker 2: Very big companies in China, very big companies in Japan market.
21:12
Speaker 2: And there's very big companies market cap wise in Europe.
21:15
Speaker 2: And so I think that those are the four areas
21:18
Speaker 2: including the United States, that have very large market cap
21:21
Speaker 2: multinational insurance companies.
21:23
Speaker 1: And today and AIG, what is the biggest challenge you
21:27
Speaker 1: face as the CEO of AIG. What are you most
21:29
Speaker 1: worried about? Well, all of.
21:32
Speaker 2: The you know what's happening, you know, geopolitically, we've just
21:36
Speaker 2: come out of a pandemic. I mean, the complexities across
21:39
Speaker 2: the world and the fragility of you know, what might
21:42
Speaker 2: happen in the future is is what I worry about,
21:44
Speaker 2: you know the most, because there's things, you know, if
21:46
Speaker 2: you told me five years ago you're going to come
21:48
Speaker 2: in be the CEO, You're going to deal with the
21:50
Speaker 2: global pandemic, two wars, you know, potential, you know, political
21:55
Speaker 2: you know, tension across the world, and also dealing with
21:59
Speaker 2: financial you know, challenges that that that's a lot. And
22:02
Speaker 2: so making sure that we you know, focus and deliver
22:05
Speaker 2: on what we you know, can do as an insurance
22:07
Speaker 2: company and adapt all the changes that are going on
22:10
Speaker 2: around us.
22:11
Speaker 1: So for young professionals who might be watching, who say,
22:14
Speaker 1: while I'm looking for a job, maybe I should get
22:16
Speaker 1: in the insurance business. Why should want somebody want to
22:18
Speaker 1: come in the insurance business? What makes it so exciting?
22:21
Speaker 2: I think our purpose and what we do for a
22:23
Speaker 2: living is is very you know, meaningful, Like we keep businesses, societies,
22:28
Speaker 2: uh you know, cities moving after you know, natural disasters
22:32
Speaker 2: or you know, moving claims and allowing companies to build.
22:36
Speaker 2: And you know, a lot of times in order to lend,
22:39
Speaker 2: you need to have insurance. And so I think it's
22:40
Speaker 2: a uh, you know, industry that really doesn't get its
22:44
Speaker 2: full credit for you know, all that it does. And
22:46
Speaker 2: I think our purpose is incredibly meaningful and we show
22:50
Speaker 2: up in moments that are really critical for you know,
22:52
Speaker 2: our customers and clients.
22:54
Speaker 1: Well, listen, you've done a very good job of dealing
22:56
Speaker 1: with a complicated situation because AIG has been in a
22:59
Speaker 1: turnaround ever since the government bailout. I guess I would
23:02
Speaker 1: call it bailout and today you would say it's financial
23:05
Speaker 1: shape is pretty good.
23:06
Speaker 2: I think it's very good. The progress that we've made,
23:09
Speaker 2: again with having so many tremendous people here that had
23:12
Speaker 2: a single purpose of putting AIG back to being an
23:15
Speaker 2: industry leader, that we've strengthened sort of every component of
23:19
Speaker 2: the company. The balance sheet, underwriting capabilities, our investment portfolio
23:23
Speaker 2: is much simpler, the company simpler, operations are streamlined. So
23:28
Speaker 2: I think we've really made enormous progress and feel like
23:30
Speaker 2: we have a lot to do still.
23:32
Speaker 1: Thanks for listening to hear more of my interviews. You
23:35
Speaker 1: can subscribe and download my podcast on Spotify, Apple, or
23:39
Speaker 1: wherever you listen.