Business Breakdowns
Episode 187 AIG: Rise, Fall, and Rebirth
Business Breakdowns

Episode 187: AIG: Rise, Fall, and Rebirth

Business Breakdowns

Episode 187

AIG: Rise, Fall, and Rebirth

Austin Hawley is a Portfolio Manager at Diamond Hill. We cover the history of AIG before and after the financial crisis, why it chose to spin out its life and retirement business, and the market dynamics affecting how insurance policies are priced.

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Show Notes

(00:00:00) Introduction to Business Breakdowns

(00:04:57) AIG: A Tale of Turnaround

(00:05:31) Understanding PNC Insurance

(00:06:56) AIG's Historical Context

(00:09:58) AIG's Post-Crisis Struggles

(00:15:17) The 2017 Management Overhaul

(00:21:42) Berkshire Hathaway's Role

(00:24:26) Strategic Moves and Divestitures

(00:28:32) AIG's Strategic Transformation

(00:30:40) Understanding AIG's Business Metrics

(00:32:10) Specialty Lines and Global Footprint

(00:33:31) AIG's Niche Businesses

(00:34:47) Evaluating Insurance Companies

(00:38:04) Competitive Advantages in Insurance

(00:42:04) Pricing Environment and Market Dynamics

(00:45:35) AIG's Investment Strategy

(00:48:25) Competitors and Comparisons

(00:50:03) Lessons from Breaking Down AIG's Turnaround

AIG: Rise, Fall, and Rebirth

Introduction

Zack
Welcome back to Business Breakdowns. This is Zack Fuss. In today's conversation, we are diving into the insurance giant AIG. AIG's story is one of a remarkable turnaround—a tale of a global insurance giant emerging from near collapse during the Great Financial Crisis. Over nearly two decades, AIG has transformed itself into a more focused and efficient property and casualty insurer.

To grasp the magnitude of AIG's journey, consider this: during the financial crisis, the company required a $180 billion bailout from the U.S. government—a sum it fully repaid with interest. For those unfamiliar with P&C insurance, we'll explore the fundamentals: how the businesses are insured, how risks are assessed, premiums priced, and assets invested. AIG's turnaround has been remarkable. From 2009 to 2019, the company lost over $30 billion in underwriting losses. Put simply, it was consistently paying out more in claims than it collected in premiums.

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