American International Group Inc. has repositioned its accounting for financial items over the past four years, which has significantly reduced its exposure to risks of class action in securities, the insurance company's executives said on Friday.
Detailed details of the changes in AIG third quarter conference call with analysts, executives noted that AIG, which has long been a leader in the liability and executive insurance sector, has also significantly reduced its primary limits.
Changes in AIG's issuance strategy have significantly reduced its exposure to class action lawsuits , which has historically accounted for 60% to 70% of the public company's D&O losses, in recent years, said Mark Lyons, AIG's CFO.
Prior to implementing its turnaround strategy, which began in 2017, AIG was overweight in technology companies, life science companies and healthcare companies, he said.
After reviewing all of its real estate / accident operations, AIG has declined the total limits it offers are $ 650 billion, and $ 65 billion of that relates to financial items, and much of the reduction comes from primary D&O, McElroy said.
Large corporations, which previously had $ 25 million in primary limits , is now offered $ 10 million in limits, he said. "81 percent of our portfolio is $ 10 million compared to what it would have been $ 25 million four years ago."
In addition, medium-sized listed companies are now offered $ 5 million in limits, compared to $ 10 million or $ 15 million , in Mr. McElroy.
"We believe that this portfolio today is a very different portfolio from a risk selection point of view, from a balance sheet perspective in terms of surplus and side A versus primary, versus boundaries, versus our control of the aggregate," he said.
AIG has also significantly dampened its non-profit D&O book in North America, with a policy retention of only 15% between 2018 and 2021, with a cumulative rate hike during the period of almost 130%, Mr. Lyons said.
"This determined change of risk selection criteria, away from billion-dollar revenues, large private companies and non-profit universities and hospitals to instead a more balanced average market book, will also drive profitability significantly. "he said.