Analysts Approve Of Recent Moves
At Chartis, But Await Better Results
Thumbs up for asbestos transfer, WC strategy & new leadership—but “a lot of fixing to do”
■ POSITIVE DIRECTION
BY CHAD HEMENWAY
IN THE VIEW of industry analysts, Chartis is moving in the right direction: giving its asbestos liabilities to a
Berkshire Hathaway company;
mostly sitting out of the workers’ compensation game; reducing writings in the volatile
excess-casualty market; and
cutting back on catastrophe-exposed property lines.
The new leadership and a
massive reorganization plan
(see interview with Chartis
CEO Peter Hancock on page
12) also are generally seen in
a positive light.
But “there’s still a lot of fixing to do,”
says Cliff Gallant, an analyst with Keefe,
Bruyette & Woods. “Chartis has not been
as profitable as its competitors. There’s
work to do to close that gap. It has been
a while since they’ve turned an under-
writing profit.”
Chartis’ 2011 second-quarter com-
bined ratio was 104.0 compared to 102.0
in the second quarter of 2010.
Standard & Poor’s predicts Chartis
will post a combined ratio of 103-104 in
2011 (97-98, excluding catastrophes and
including potential reserve development).
How Does AIG Rate?
FIRM
Keefe, Bruyette & Woods
Citi
Credit Suisse
BofA/Merrill Lynch
Barclays
Deutsche Bank
Goldman Sachs
Wells Fargo
Sandler O’Neill
Macquarie
DAte
8/9/2011
7/29/2011
7/7/2011
6/10/2011
6/9/2011
6/9/2011
6/8/2011
5/13/2011
4/4/2011
3/22/2011
and expertise in writing complex risks as positives.
“Not a lot of companies
can offer such breadth,” Bal-
lentine says. “The foundation
has proven to be strong.”
AIG, told NU at the time that the combina-
tion of changes at Chartis would “generate
top-line growth, providing clarity to sales”
by streamlining operations.
However, “fixing a property and casualty company is not easy,” Gallant
says. “It’ll take several years to close
the gap.”
RAtInG
Market Perform
Hold
Neutral
Buy
Equalweight
Buy
Neutral
Market Perform
Buy
Outperform
STUNG, BUT STILL ON TOP
The companies that comprise Chartis
have lost business since the near collapse
of parent American International Group
Inc. (AIG) in 2008 and, according to
an A.M. Best Co. credit report, “Though
diminished, the lingering impact of the
reputational damage suffered by its parent
company has been a drag on the group’s
business in recent years.”
Parent AIG may no longer have any out-
standing debt with the U.S. government,
but the feds still own 77 percent of the
company, and taxpayers are not yet whole.
RESERVE RESERVATIONS
Chartis took an underwriting loss of
$5.2 billion for the last quarter of 2010
primarily because of reserve charges.
AIG took a charge of more than $4
billion in the fourth quarter to bolster
Chartis’ loss reserves.
About 80 percent of the charge will
be put toward adverse development from
E continued on page 32
2011
JJJ
A AIG reports an $11.2
billion profit for the fourth
quarter and $7.8 billion in
net income for 2010, driven
by asset sales.
MARCH 2011
A Chartis says it expects
$700 million in losses from
the March 11 earthquake
and tsunami in Japan, stem-
ming from its 54.66 percent
equity stake in Fuji Fire and
Marine Insurance Co. Later in
the month, Chartis acquires
more than 305 million shares
of Fuji Fire and Marine, bring-
ing its ownership stake to
over 98 percent.
A At the end of the month,
Chartis reorganizes its
management team and an-
nounces that Peter D. Han-
cock (pictured) is replacing
Moor as Chartis CEO. Moor
becomes vice chairman of
Chartis. The company es-
tablishes two groups—com-
mercial and consumer—with
Doyle as the chief executive
of global
commercial
business and
Jeffrey L.
Hayman as
the head
of global
consumer
business.
Chartis also divides into
four regions, with Peter J.
Eastwood as CEO of Chartis
U.S., Baugh as the head of
operations in Europe, Jose
A. Hernandez as chief executive in the Far East, and
Julio A. Portalatin heading
Growth Economies.
continued on page 32 E
PropertyCasualty360.com
September 19, 2011 | National Underwriter Property & Casualty | 31
