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Life Insurance
Life Reshaped

AIG Life & Retirement CEO Kevin Hogan has garnered little attention, but his group has produced a consistent level of profitability while the insurer turns around its general insurance business.
  • Jeff Roberts
  • January 2020
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Photo by Angel M. Negrón

 

Key Points

  • Market Leader: AIG is the market leader in annuities.
  • Healthy Revenue: Its life and retirement business has produced pre-tax statutory earnings in excess of $21 billion over the past five years.
  • Rising Business: AIG has secured over $1.2 billion in pension risk transfer transactions in 2019, including Avery Dennison Corp and Rollins.

 

Kevin Hogan's friend never made it home.

The man owned his own business, and it took him into harm's way on Sept. 11, 2001. The morning when everything changed.

“His was one of those cars that never left the parking lot that night,” said Hogan, CEO of AIG Life & Retirement. He chose not to identify his friend. “He didn't make it out.”

Hogan's voice was even, but subdued, as he told the story from his office on the 30th floor of AIG headquarters in Lower Manhattan.

He and his friend occasionally talked sports, investment strategies and financial protection over a beer. The man “didn't have a life insurance agent. Didn't have a financial adviser. Didn't have an estate attorney or anything like that,” Hogan said. “He had very little protection for his family.”

His friend knew he needed to fix that. But he ran out of time, and his family was left without protection coverage.

“What happened to his family is a terrible tragedy,” Hogan said, leveling his blue eyes to meet those of the person he was speaking with. “I made the decision right then and there that I was going to focus the rest of my career on making sure there are fewer people like that tomorrow than there are today.

“So I decided to focus my career on the life and savings business.”

It has culminated in Hogan guiding one of the largest life insurers in the United States. Under him, AIG's broad and diverse life and retirement portfolio has generated strong current and historical returns supported by a consistent level of profitability. The group has leadership market share positions in many of its lines of business and significant economies of scale with a strong national distribution reach across many platforms capable of reaching a broad audience, according to AM Best's credit report on the company.

AIG insiders credit Hogan, 57, with transforming the business since his return to the company in 2013.

He has reshaped Life & Retirement, which has helped the business contribute to CEO Brian Duperreault's goal of returning AIG to a position of industry leadership. Hogan's business strategy focuses on the customer, capital efficiency and deploying capital to high, risk-adjusted return opportunities.

“I think that our life insurance business is a tremendous asset of the company,” Duperreault said in December 2018 at the Goldman Sachs U.S. Financial Services Brokers Conference, “and in it are our people who really are skilled in dealing with lifetime retirements and the problems of demographics that exist globally.”

Duperreault could not be reached for comment for this story.

Hogan's domain includes traditional life insurance, individual retirement, group retirement and institutional markets. It has produced pre-tax statutory earnings of more than $21 billion over the past five years, according to AM Best data.

AIG Life & Retirement Group ranked No. 5 among the top U.S. life/health insurers based on $283.7 billion in admitted assets in 2018. And it became the top seller of annuities last year for the first time since 2007, according to LIMRA.

Hogan also runs the pension risk transfer business, which has secured over $1.2 billion this year, including transactions with Avery Dennison Corp. and Rollins.

“The core of our risk management strategy is the multiple products that we're in and the multiple channels,” Hogan said. “We're not beholden to any given product. And as a result, we have been able to deliver a very consistent financial result.”

The life and retirement business has produced a “very strong operating performance,” according to AM Best's credit report. It includes a 14% increase in premiums and deposits year over year in 2018.

The division accounted for 31% of AIG's total revenue in 2018. But it continues to be overshadowed by the struggles of its general insurance arm. Poor underwriting results and heavy catastrophe losses have plagued the unit in recent years and garnered nearly all of the headlines.

The turbulence is the latest chapter—and maybe the final one if Duperreault has his way—in AIG's turnaround since its near collapse in the 2008 financial crisis. [AIG said its third quarter 2019 results for general insurance showed significant improvement over the prior year, and that it remains on track to deliver an underwriting profit for the full year.]

“Obviously, general insurance gets a lot of attention [and] should…” Duperreault said at the Goldman Sachs conference. “Now poor Kevin never gets any attention. It's not that we don't think of Kevin. …

“Obviously, he was a little ahead of the general insurance.”

Hogan oversaw the recent completion of a six-year transformation of his segment. It brought together the various life and retirement entities operating with separate balance sheets and capitalization into one manufacturing unit. It also combined its distribution channels under one set of wholesalers.

The end result was capital efficiency and a streamlined business, he says.

“We've done a lot of the restructuring work in Life & Retirement, and we've come out of that in a great position to grow for the future,” Hogan said.

It is the focus of the business as a new decade dawns. But to understand where Hogan plans to take AIG Life & Retirement, you have to see where he has been.

A Defining Moment


While it’s a challenging time relative to interest rates and market conditions, the needs that we serve are huge and getting bigger each and every day. We’re solving what I think is the world’s biggest problem—certainly the country’s biggest problem—which is the need for protected lifetime income.

Kevin Hogan
AIG


Breakfast was squash congee, eaten at a KFC in western Beijing.

It was Jan. 3, 2004, Hogan's first day of work at the People's Insurance Company of China.

He stood out as he ate his porridge next to the insurer's headquarters.

“A bunch of the folks were actually staring at me because a lot of them had just never seen someone like me,” Hogan said.

He was part of a joint venture between AIG and the state-owned enterprise in the communist nation. The New York-based insurer took a minority stake in PICC and agreed to help it build a supplemental health insurance business.

“On Day One it was me, a translator and 155,000 of the employees of the People's Insurance Company of China,” Hogan said with a laugh. “I was a little intimidated walking in.”

In a career of defining moments, his time in China resonates nearly as profoundly as the loss of his friend on 9/11.

The death altered Hogan's career path, influencing him to fully transition to life and retirement from property/casualty and health. And the PICC experience broadened his already global viewpoint, providing insight that continues to serve him well.

He would hone his leadership style in managing businesses in China, Tokyo, Hong Kong, Singapore, Taiwan and Zurich.

“That was helpful to me in everything I've done,” Hogan said. “It started with a sense of empathy and interest and understanding—what drives other people?—and then translating that into an entire societal context.”

He entered the PICC partnership with an effective game plan, immersing himself in the Chinese culture and business environment. He won over his new colleagues quickly, he said.

PICC had arranged for a chef to prepare lunch his first day “because they recognized what they were serving in the lunchroom may not necessarily cater to the interests of the West,” Hogan said.

But he asked to sit with his new colleagues at lunch and eat what they ate.

“I love all different varieties of food, but it was more about sending the message,” Hogan said. “If you show that respect, even if you can't speak the language, you can connect with people in a different way. They can understand and see the commitment.”

By the time Hogan moved on in 2005, he and his team helped PICC develop a new range of supplemental health products that remain successful today, he says.

His experience in China remains close to his heart. He learned a few tricks of the trade, such as employing two translators overseas. One translator listened while the other spoke to ensure they captured the precise context.

“I got to see China through a local company's eyes,” Hogan said. “It was not only a totally different society, it was a very strong Communist society. And it [PICC] was one of the most treasured state enterprises.

“I got to experience going to some places in China that Westerners, at the time, hadn't really been. And that's when you see the real China and realize there are a number of Chinas. That's where you see the real opportunity and the challenges that it presents. “

Reminders of his global perspective surround him in his office.

A framed, autographed rugby jersey adorns one wall, perpendicular to a kakejiku, a Japanese hanging scroll.

On a shelf across the room, a framed photo depicts Hogan and colleagues on stage wearing bunny ears. They were in the middle of performing a nursery rhyme to commemorate Chinese New Year at PICC.

“The way they celebrated it was each department put on a sketch or a song,” Hogan said. “We did it in front of thousands.”

His next assignment after PICC was running AIG's China and Taiwan life insurance businesses. He already served as president of AIG's Accident & Health Division in New York and chief operating officer of American International Underwriters, its international P/C arm.

The youngest of 11 children to two first-generation Irish Americans, Hogan may have caught the travel bug early just to find some space.

After growing up in New Hampshire, he studied abroad as a high school senior, living with a host family in Rennes, France. The indelible experience pushed him to volunteer for international assignments throughout his career.

“I spent over half my career in Asia,” Hogan said. “My wife is from the Philippines. Our kids, if you ask them where they're from, they'll say, 'the world.' Our daughter was born in Hong Kong. Our son was born in Singapore.”

'The Best AIG We Can Be'

The image from the financial crisis remains burned in the consciousness of many, even more than a decade later.

The iconic sign. And three simple letters: A-I-G.

The company was one of the faces of the crisis. Although AIG has long since dealt with the reckoning of 2008, the damage was extensive.

“I'm a big believer that you can't change history, so you just have to focus on the future,” Hogan said. “You can learn from history, but you can't change it.”

He began with AIG in 1984 when it was the world's biggest insurer. By February 2007, it had a market value of $174.47 billion, according to Forbes.

Then the subprime mortgage market melted down. Bear Stearns had to be rescued. Lehman Brothers went bankrupt. And taxpayers bailed out AIG with $182 billion as it too neared collapse.

Although credit default swaps covering billions in toxic mortgage-backed securities were to blame, not the insurance business, the entire enterprise was caught in the storm.

Hogan, then chief distribution officer of the international life segment, left in 2008 as the company began selling off nearly $100 billion of assets to pay back the government. It included spinning off its Asian life insurance arm in 2009, then selling its remaining stake.

“In the throes of the crisis, Ed Liddy announced that he was going to sell all of the life insurance businesses in order to rescue AIG,” Hogan said. Liddy served as interim chairman and CEO at the request of the U.S. Treasury Department. “That was a career moment for me. Their interests and my career interests didn't coincide.”

Hogan took over Zurich's life insurance business in the Americas and eventually its entire global life operation. But he returned to AIG in October 2013 after a personal recruiting pitch from then-CEO Bob Benmosche.

“He came and visited me in Zurich. We had breakfast together and he said, 'We didn't sell them all,'” Hogan said with a laugh.

Benmosche wanted him to “help build a bridge between the good parts of AIG's past and the future that he wanted to establish,” added Hogan, who became CEO of AIG Global Consumer Insurance.

By then, AIG had paid back the government, plus $22.7 billion in profit.

In 2017, Duperreault restructured the company into General Insurance and Life & Retirement units. Hogan took over the latter.

Four days after the announcement, AIG shed the “too big to fail” federal designation.

Despite being slapped with “the most hated company in America” label during the crisis, AIG no longer carries a stain on its reputation, Hogan said.

“The way [Duperreault] characterizes it is, 'Let's make AIG the company it always should have been,'” Hogan said. “There were great old days, but it was never perfect. We have an opportunity now to make the best AIG that we can be today.”

Looking to the Future

Hogan first met Duperreault in 1984.

Back then, he was a trainee in the casualty department of AIU. Duperreault was head of the unit. Hogan would pass his office each morning.

“From the very beginning, you could tell how much of a people person he was and how much he cared,” he said. “He would ask from time to time, 'Are you learning what you think you should learn? Are people being nice to you?'”

Now Duperreault is the big boss, and Hogan is one of his top lieutenants.

AIG Life & Retirement, with a Best's Financial Strength Rating of A, is producing reliable results while the company overhauls its property/casualty business.

The Life & Retirement division is looking to meet the growing needs of the market. They include an aging population, longer lifespans and a retirement crisis in the United States.

Nearly 60% of Americans say they fear running out of money more than dying, according to the AIG Plan for 100 Survey.

With those needs, comes opportunity.

So Hogan is “on a mission.” He wants to educate consumers and spur them to take action so their families do not end up like the loved ones of his friend who died on 9/11.

“While it's a challenging time relative to interest rates and market conditions, the needs that we serve are huge and getting bigger each and every day,” he said. “We're solving what I think is the world's biggest problem—certainly the country's biggest problem—which is the need for protected lifetime income.”

Hogan's group continues to seek opportunities to generate new business, both organically and through acquisitions.

Life & Retirement has a fundamental U.S. base, with only modest operations internationally. But Duperreault repeatedly has said AIG would expand if the right opportunity arose.

The insurer did acquire Ellipse, a specialist provider of group life risk protection in the U.K., in 2018 from Munich Re.

“The priorities in life are very similar to the priorities in general insurance: Getting the strategies done, cleaning up the past, getting a strong base for future growth,” Duperreault said at the Goldman Sachs conference.

Hogan and Duperreault have also modernized operating platforms and enhanced the division's digital capabilities. Upgrades have occurred in the annuities platform, in its distribution interfaces and for participants and plan sponsors in group retirement.

“Everything is driven by data, automation and analytics,” Hogan said. “It's going to change the way people think about living. That dovetails with the big challenge that we're addressing in the business.”

However, AIG Life & Retirement still relies on advisers to sell its products.

Most of its product suite is distributed through a network of more than 200,000 financial advisers and agents across the country. Hogan calls the distribution network its “secret weapon.”

“Market share is not our strategy,” Hogan said. “Our strategy is to compete at scale in the businesses in which we participate. And the fact that we've been successful is a validation that we are meeting our distribution partners and our customers' needs.”


Jeff Roberts is a senior associate editor. He can be reached at bestreviewcomment@ambest.com.


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