AIG

"AIG’s engagement with domestic policy issues of the day was vital because of the vast scale of its business. It did not win every position, and not every policy debate was exciting, but AIG was always at the table and its victories translated into real gains for the company, the insurance industry, and its customers. While many other CEOs considered them extracurricular affairs, Greenberg saw participation in these activities as central to running AIG’s business, and real gains to AIG resulted."

"Greenberg forged a culture committed to keeping expenses low and earning a profit from underwriting insurance, rather than relying on investment results from premiums received."

"AIG was not an easy place to work and was certainly not for the complacent. There was a kind of self-filtering employee base: few who were not up for what AIG demanded would accept a job there in the first place, and those who found themselves unprepared quickly moved on."

"AIG began to accumulate substantial corporate capital in the 1980s, which grew to enormous sums through the 1990s and early 2000s. Investment of AIG’s capital was always handled separately from the insurance operations that generated the underwriting profits that drove this capital accumulation. Unlike other insurance companies, success for the insurance executives was defined solely in terms of insurance operations, rather than in terms of the yield on investments."

"Complementing these executives and staff was a truly distinctive breed of AIG executive, epitomized by John Roberts, called the “mobile overseas personnel” or MOP. This group did service stints in numerous countries during their career, as many as 10 to 15, taking two-to-three year terms in each place. It was almost like the foreign service of the United States. They were corporate ambassadors who became legends within AIG. An experienced MOP could walk into any AIG office in the world, from Taiwan to Santiago, and know just about everyone. Having traveled widely, he could troubleshoot the thorniest problem successfully anywhere in the world, whether obtaining the release of colleagues captured by hostile governments or negotiating with customers perceived to have fabricated claims. The personality type could vary, from the diplomatic to the irascible, the elegant to the brusque. But they tended all to be wise, urbane, and multilingual—cowboys, pioneers, Indians, a cadre of colorful actors that made the company tick."

"There were a vast number of different enterprises in the Starr organization, with far-flung roots and structures in scores of countries. The organization was also therefore fragile, Starr having just died, a young Greenberg in command, and a mix of assets that might appeal to assorted insurance companies or takeover artists. Such an integration could not be accomplished all at once, but every phase had to be meaningful, and the company had to be protected throughout the transition from takeover risk. So Greenberg asked the largest shareholders, together owning about one-third of the total, to sign a shareholders’ agreement restricting their right to sell shares outside the group. Most did so."

"Property and casualty insurance exposed AIG to Mother Nature’s vicissitudes: earthquakes, floods, and tsunamis. The business is also volatile as a result of myriad other factors from the vagaries of interest rates to the uncertainties of litigation. A property and casualty insurance company can generate an underwriting profit for several years only to face a massive loss due to such circumstances. It is therefore desirable to diversify such risks by entering into businesses that operate in different ways. In comparison, life insurance is stable, at least so long as premiums received are invested conservatively, and in any event the variability in life insurance is usually different in both kind and time compared to property and casualty. The two lines together, therefore, provided an optimal mix for AIG, especially as it diversified its life insurance business across the world and in many product lines."

"SICO halted its historical practice of providing performance-based compensation in the form of AIG shares that could not be sold until retirement,"

"managers were trained that nothing but effectiveness mattered, so employees were hired, rewarded, and promoted without regard to other litmus tests, such as pedigree or politics. AIG invested heavily in employee training programs at all levels, in all countries. At training sessions, presentations would be made by AIG’s top global executives, including Greenberg. These programs stressed professionalism, referring to the importance of good judgment, integrity, and personal responsibility."

"On the merits, AIG argued that allowing it to operate in Malaysia would generate substantial benefits to the country because it would be an investor of “patient capital” locally. Especially for life insurance companies such as AIA, the business of insurance involves accumulating and husbanding large amounts of capital that must be invested for the long term in the locale. AIA may write an insurance policy for a 30-year-old citizen, receiving premiums, and be prepared to pay under the policy on any given day during a period as long as the next 40 years. The company must invest all the premiums it receives along such a lengthy time horizon, often in long-term government bonds. These bonds fund infrastructure, such as roads, bridges, and hospitals."

"Professionalism and excellence were the standard and there was a certain relentlessness to it—a relentless desire for excellence and to be the best. [Greenberg] was an iconoclast too, so he was not going to do something that everybody else did. He was going to do something different. So there was this feeling of innovation, of changing the way things were done. That became the core ethos of the company and we all bought into it. We all thought about new products and changing how we approached the business, to try something innovative. Whether it was technology or products or sales, we felt we were supposed to change, not protect the status quo. That was the difference."

"AIG withdrew from the market when prices were low compared to risks, while competitors fought for business, and reentered when prices rose and an underwriting profit could be earned, when competitors retreated. Competitors failed to stress the importance of underwriting profit."

"To implement the profit center model, Greenberg held regular budget meetings: weekly with the handful of most senior executives, monthly with a larger group that oversaw the entire company, and quarterly with each manager."

"by Victor Hurd,"

"AIG’s culture of effectiveness was reinforced by the profit center model and the cardinal principle of earning an underwriting profit."

"interest rate swap business. Because AIG used these devices in managing its own financial risks, Matthews was familiar with the business. The product would attract customers wishing to hedge exposure to interest rate fluctuations. Some have loans requiring payment of a fixed rate, when a floating rate would be cheaper or more convenient, and vice versa."

"AIG’s culture was characterized by a relentless quest to be first—first to develop and launch products, first to open and grow markets, first in performance from earnings to growth to assets."

"The deals came fast and furiously, but as I was looking at assets in central Europe, a lot of new faces started to appear among potential buyers. Instead of other lone capitalist raiders like me and one or two native banks, some of private equity’s biggest names, including the likes of KKR and Blackstone, were beginning to crop up. Auctions were getting crowded. Instead of four or five people bidding for an asset, there were now often as many as 14 or 15. It was becoming too competitive. Assets were going for the wrong prices and it was time to sell, rather than buy. So I began offloading businesses, selling the telecoms companies and the Bulgarian bank in 2007 for fantastic prices. We made a profit of €400 million alone on the sale of the Bulgarian telecoms assets to the equity arm of AIG, a US insurance group. And I started to look for a way out of the Icelandic assets."

"My vision was not coming together on the banking side, with analysts saying there wasn’t as much synergy in international telecoms as in pharmaceuticals, where you get real economies of scale. So I sold my Bulgarian and Czech telecoms investments within about ten months of each other. BTC was sold to the private equity arm of AIG, a US insurer, which popped out of the woodwork when I was expecting Greece Telecom, Deutsche Telekom or Turkish Telecom to buy it. Lehman Brothers advised us and AIG bought our 65 per cent stake for $855 million – far more than we were expecting. This sale wasn’t without complications either. Towards the end of the auction, I had lunch in London with Saad Hariri, the son of the late prime minister of Lebanon, and prime minister himself in 2009–11. He was the head of Oger Telecom, a Saudi/Lebanese company that owned Turkish Telecom, and he signalled that he was interested in buying BTC. I was keen and thought it would fit well with the group’s Turkish operations. Then AIG made a late bid and I was summoned to Bulgaria to see the prime minister. ‘We don’t want to sell to the Turks,’ he told me. ‘We want the Americans.’ I told him it was basically down to price, but the prime minister made it clear that I should bear in mind the time that might be needed to clear the deal, depending on who I chose. ‘Fine,’ I replied. And of course we sold to AIG. I have no regrets about that. We made almost €400 million profit on that deal."