In September 2008, American International Group Inc. rattled the confidence of credit markets after AIG”™s exposure to collateralized debt obligations became widely known.
More than a year later, we are learning the extent to which the crisis may have shaken the loyalty of AIG property and casualty insurance customers in Connecticut.
Heading into 2009, AIG written premiums totaled $276 million in Connecticut, down 39 percent from 2008 when the New York City-based company took a federal bailout after the credit markets collapsed.
AIG”™s 39 percent decline in premium collections in Connecticut was far sharper than that experienced by the more than 700 carriers that do business in Connecticut as a whole, with the $6.4 billion in total premiums written down just 3 percent compared with 2008, according to the Connecticut Insurance Dept. Take away AIG”™s decline and the property and casualty industry would have only just missed breaking even.
Even as AIG has sought to reassure corporate clients in the past year that its insurance entities were insulated from its exposure to the default crisis, the company has nevertheless looked to divest of spin off multiple insurance units, including through the formation of a new company called Chartis to run its current book of property and casualty business.
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In its annual ranking of property and casualty insurance companies, the Connecticut Insurance Dept. reported that Allstate Insurance Co. again led all carriers here with $250 million in direct written premiums, about $34 million more than Liberty Mutual Fire Insurance Co. and nearly $100 million more than Geico General Insurance Co.
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The ranked figures published by the department, however, do not include affiliates that are subsidiaries of a common holding company. For instance, when all affiliates of Allstate are totaled, the company”™s written premiums in Connecticut were $444 million in 2009, while Liberty Mutual”™s book of business totaled $709 million.
For its part, no AIG affiliate appears in the top echelon of carriers in Connecticut, but added together its myriad subsidiaries represent a substantial book of business.
Whether the result of the CDO scandal, the onset of the recession, divestments or other business priorities, AIG”™s business has clearly suffered in Connecticut and elsewhere in the wake of the financial crisis. In the third quarter of 2009, AIG reported a 13 percent decline in premiums written by its Chartis general property and casualty insurance operations, attributing the drop in part to the recession, currency valuations, the sale of its Brazil operations, and “price discipline” in its words, particularly in the area of workers”™ compensation insurance.
The company indicated it is facing stiff competitive pressure for accounts.
“Pricing in our commercial property-casualty business has been stable,” said Robert Benmosche, CEO of AIG, in a prepared statement reviewing its third quarter results. “Management continues to monitor rates closely and maintain underwriting discipline, turning away some renewal business due to aggressive pricing by existing and new competitors.”
Meanwhile, the brokerage community that places corporate business with various customers is also undergoing its own consolidation in the tri-state region. New York City-based Marsh & McLennan Agency L.L.C. last month announced it is acquiring NIA Group L.L.C., a Paramus, N.J., company which has an office in Milford.
As ranked by the Fairfield County Business Journal, Marsh is the largest insurance agency in Fairfield County with some 120 employees at last report locally.
