Chartis Charts Its Path Away From AIG

The biggest challenge facing Chartis -- the re-christened American International Group's commercial property/casualty and high net-worth personal lines business -- is not getting out of the shadow of AIG so much as dealing with a difficult economy, said the head of its U.S. operations.

"Our challenges to the top line are more related to the economy than anything else," said John Doyle, executive vice president of Chartis and president and chief executive of Chartis U.S. "The natural catastrophe season last year was a very difficult one. Obviously, investment income was under pressure given the performance of the financial markets. In addition to that, the economy put pressure on the top line of business for everyone in our industry. While we've had some unique challenges to deal with, the far greater challenges related to those issues, and in spite of that, our operating performance was strong."

Doyle touted the company's $3.3 billion in operating income last year. "I'm proud of how we performed given the environment," Doyle said.

In an interview at Chartis corporate headquarters on Water Street in New York's financial district -- just a short walk down Maiden Lane from AIG's headquarters on Pine Street -- Doyle said the entire property/casualty insurance industry has faced big challenges, and that has impacted the company more than its association with the now tarnished AIG name.

From a seat in a 30th floor conference room overlooking the East River, Doyle said: "While AIG's challenges have had a modest impact on our top-line production, the effects of the AIG issues continue to decline over time."

In March, AIG rebranded its commercial property/casualty operations and high net worth personal lines business as AIU Holdings Inc., perhaps a tip of the hat to AIG's well-established American International Underwriters, which held AIG's international property/casualty business. But the AIU rebranding was just a temporary measure, a first step to distance the still-sound P/C insurance operations from the sullied AIG name after the holding company took a $182.5 billion federal bailout to avoid collapsing.

The company took the name Chartis in late July, as it moved forward with plans to become independent from the parent AIG. In connection with the rebranding, the company said it would continue its plans to elect a new board, establish a special-purpose vehicle to hold the equity of AIU Holdings, and appointed Kristian P. Moor as president and CEO.

Long-range plans include a possible sale of a minority stake in the business, perhaps through an initial public offering, then Chairman and CEO Edward M. Liddy said in AIG's 2008 annual report.

Doyle said he couldn't speculate about a possible IPO down the road. "Our focus within Chartis is building the value of our business and pursuing a path towards operational independence, and that's where we are focused."

But, Chartis has spent a lot of time in the last year answering questions from clients and brokers about its business and its relationship to AIG, Doyle said.

"It's been rewarding ... how our clients and brokers have given us the time to explain our story. We sell to a sophisticated marketplace here in the U.S. and Canada, and given the opportunity, they have chosen to do business with us. While we spent a lot of time explaining, we had very willing listeners," Doyle said.

He said client retention has been "very strong, right within historic norms."

While some competitors have accused AIG of underpricing business in an attempt to retain customers, Doyle said the company has not changed how it prices business.

"Competitors continue to be frustrated by their inability to win business from us. It's more than about price, it's about the overall strength of our enterprise," he said.

Chartis is derived from a Greek word meaning map, which the company said underscores its 90-year history guiding clients.

In offices decorated by Asian antiques and Bonsai trees -- perhaps signs of AIG's Asian roots -- Doyle stressed the company, which has had a legendary reputation for taking on risks that other companies shied away from, will not back away from innovation. "One of our competitive strengths historically has been our ability to write complex business. Nothing will change that. It takes the best people to do that, and we have them," he said.

Doyle said the company has introduced 40 new products in the past 12 months.

"It's part of who we are. You will continue to see us innovate," he said.

While some in the industry have spoken about a possible "brain drain," at Chartis after a number of high-level defections -- including Kevin Kelley and Shaun Kelly, CEO and president, respectively, of AIG's excess and surplus lines carrier Lexington Insurance Co. left to join Ironshore -- Doyle insists the company has plenty of bench strength in its 34,000 employees worldwide.

"We have a tremendous amount of talent, and a very experienced team," Doyle said. "Many of those folks have been with us a real long time. We have a tremendous amount of depth."

Doyle said he and others at Chartis are excited about the company's future.

"I think we are closer to our clients and brokers than we've ever been. We've spent more time with them in the last year than we ever have, and I think they know us better. They know we are committed to our business, and to the future of our franchise."