American International Group Inc (AIG): Did Berkshire Hathaway Inc. (BRK.A)’s Poaching Just Send The Insurer Back Into the Abyss?

Berkshire Hathaway Inc.Executives move from from one company to another all the time — that’s a normal proceeding of the business world. But when several high-ranking executives leave all at once for the same company, we’re often seeing a piece of a larger puzzle. That’s what we saw this past Friday, when it was announced that four top employees were defecting from American International Group Inc (NYSE:AIG) to join the team at Berkshire Hathaway Inc. (NYSE:BRK.A).

The moves pose several questions for American International Group Inc (NYSE:AIG) investors: Are the people in the know fleeing because they know something we don’t? Does this leave AIG vulnerable? How will the company move forward? Let’s look at the people that left, how it may effect AIG, and what you should consider for your investment.

Name that executive!
A quick lineup of the defecting executives gives you a good idea of how Berkshire Hathaway Inc. (NYSE:BRK.A) will be using their talent:

Peter Eastwood, head of American International Group Inc (NYSE:AIG)’s U.S. property-casualty operations.

David Bresnahan, president of  Lexington Insurance, the excess and surplus insurance division of AIG.

Sanjay Godhwani, president for Latin America and the Caribbean for AIG’s property-casualty operations.

David Fields, another top property-casualty executive.

Berkshire Hathaway Inc. (NYSE:BRK.A) is ranked seventh overall in the property-casualty providers as of year-end 2012, with 3.88% of the market share, while American International Group Inc (NYSE:AIG) is ranked fifth with 4.58%. So with three of the new employees heading major P&C units for AIG, their knowledge will surely help Berkshire to expand where necessary. The final member, Bresnahan, led the excess and surplus operations — one of AIG’s most successful segments, with the company dominating the market with an estimated 20% share. Berkshire Hathaway Inc. (NYSE:BRK.A)’s E&S operations are only a fraction of American International Group Inc (NYSE:AIG)’s, with an estimated 1.6% of the $25 billion market.

So with that info, we can see what Berkshire Hathaway Inc. (NYSE:BRK.A)’s objectives might be, but where does that leave AIG? The company itself has stated that it possesses a “deep bench,” with lots of talented and capable people willing to step up and take over added responsibilities after the departures. Since the business operations of the P&C and E&S divisions are so established, there is little to fear that the whole house of cards will fall because of the changes in personnel. But regardless, the move is a big hit to American International Group Inc (NYSE:AIG) whether it realizes it or not.

It’s all a matter of perception
In investing, perception of a company can oftentimes sway someone’s opinion enough to make or abstain from a buy. With AIG, the company’s involvement in the financial crisis has created a lasting impression on investors that the company is bad, weak, deceiving, and the like. And with the news that four top players are leaving, investors’ perception of the company may be sustaining that impression further.

If you note the timing of this news, it’s easy to guess that these executives stayed with AIG throughout the resolution of the bailout and now think it’s an appropriate time to seek new positions since the company has paid off all of the governmental money. In that case, their loyalty to the cause is admirable and gives them every right to leave without there being an underlying problem. But since there hasn’t been any formal comment, there is little support that will keep investors on that track of thinking.

Looking forward
As a long-term investor, whether you hold AIG stock now or are thinking about buying some shares, keep in mind that you should really focus on whether this will effect the fundamentals of the company. With established operations, there may be little change with new management, or a new leader could step up and change things for the better (or worse). This is where you have to decide what’s important to you and your portfolio. AIG will be reporting its first-quarter earnings on Thursday, so keep and ear out for whether the company discusses any of the recent personnel moves and how American International Group Inc (NYSE:AIG) will move forward.

The article Did Berkshire’s Poaching Just Send AIG Back Into the Abyss? originally appeared on Fool.com and is written by Jessica Alling.

Fool contributor Jessica Alling has no position in any stocks mentioned — you can contact her here. The Motley Fool recommends and owns shares of AIG and Berkshire Hathaway and has options on AIG.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!