AIG Moves to Spin Off Key Units

Insurance Lines to Be Renamed to Create Distance From Parent

American International Group said yesterday that it will accelerate the divorce of its global property and casualty insurance businesses from the parent company as part of an effort to restructure itself and rebrand its more profitable divisions.

Last month, AIG announced the creation of AIU Holdings as a holding company for some of AIG's most successful insurance operations. When fully formed, officials said, the new company would employee 44,000 people and serve 40 million customers in 130 countries.

Now, AIG says it will speed up its strategy to make AIU Holdings an independent entity with its own board of directors, management team and brand name. In a news release yesterday, the company said it would transfer AIU Holdings into a special purpose vehicle, or SPV, in order to accelerate the sale of a minority stake in the operation, which eventually could include public offerings.

In addition, AIG will buy parts of the AIU business, including stakes in an aircraft leasing operation, a reinsurer and mortgage guarantor. The move is part of a larger effort designed to help repay the government's investment. The most recent federal rescue of AIG, unveiled in March, involves a combination of cash investments, debt relief and guarantees from the Treasury Department and Federal Reserve. The total commitment stands at about $180 billion.

Yesterday's announcement signals a forceful push to release crucial divisions at the insurance giant from the stigma of the AIG name, which has grown increasingly tarnished in recent months -- a fact that chief executive Edward M. Liddy acknowledged at a recent congressional hearing.

"I think the AIG name is so thoroughly wounded and disgraced that we're probably going to have to change it," Liddy said. "And in fact, as we think about our property casualty business in the United States, which did travel on the AIG name, we've already begun the rebranding process to AIU. And on the life side, many of those businesses already have different names. So where there may have been an approach to use one single name like AIG, we're reversing that and going back to some of their individual brand names."

John Q. Doyle, an AIG executive who has played an integral role in the formation of AIU Holdings, could not be reached yesterday for comment. But in an interview this week with the trade publication Insurance Journal, Doyle said that distancing important property-casualty units from AIG's soiled reputation was necessary and beneficial.

"It's a step for us to operate more independently of AIG . . . to do some re-branding and management appointments, create an independent board and then potentially attract some third-party investors," he said. "We think it's important for us to provide our marketplace the ability to distinguish the well-capitalized property casualty companies from the challenges that AIG has."

While the desire to distance certain divisions from the AIG name is understandable, some observers question whether a name change alone is sufficient to retain customers and assuage the public animosity that the company has engendered in recent months.

"Changing a name isn't going to mean anything unless they change behavior," said Kasper Ulf Nielsen, managing partner at the Reputation Institute, a New York-based organization that helps companies manage their reputations. "They lost the trust they had. Changing your name on paper might seem like a good idea, but reputation is based on people's perception of your actions."

The group plans next week to publish its annual survey of the reputations of the 150 largest U.S. companies. A year ago, AIG fell in the middle of the pack. This year, its reputation plummeted.

"It's sharing the bottom with Halliburton," Nielsen said.