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 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

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!