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AIG's Benmosche Halts 'Alleged' IPO of Chartis

American International Group shares rose today on news - or rumors - that CEO Robert Benmosche told employees that he doesn't plan to hold an intiial public offering of its Chartis property casualty unit. The question is: why is that a surprise?

It seems that anytime AIG or one of its employees sneezes, it becomes news. Just yesterday an AIG employee received a $4.3 million bonus, which would go unnoticed at Goldman Sachs. But because it happened at AIG, it was picked up by numerous media. Likewise, not spinning off a crown jewel wouldn't even merit a mention at another company.

Not to dredge up old news, but former CEO Ed Liddy had, at least at one time, indicated that this property casualty unit, which has been reborn in at least three forms, was the one he wanted to save. Not surprising, since Liddy came from Allstate, the quintessential property casualty insurance company.

When Liddy was replaced in August by Robert Benmosche, the former CEO of the nation's largest life insurer MetLife, Benmosche clearly said he wanted to "slow down" the divestiture process. And, so far, divestitures have been relatively minimal - a few buildings, a unit here and there, as well as two Asian units, AIA and Alico, which were put into special purpose entities so that the proceeds would go to the government when they were sold or spun off in IPOs.

Perhaps the real question is can AIG even sell Chartis to another company or to a jaded stock market? The answer: probably not. AIG has apparently been trying to peddle Alico to MetLife, but without success. AIG's aircraft leasing business hasn't found a buyer. Would it do any better with Chartis?

Brokers and competitors alike agree that AIG's property casualty unit is one of the biggest in the industry, and therefore one of the reasons that AIG received its $182 billion federal bailout. If AIG had crashed, the rest of the market couldn't easily absorb its client roster. They also say AIG's agents and employees are among the most efficient in the business.

But there's no doubt the brand name is damaged. The P-C unit had to change its name twice in the last year, first from AIG to AIU and then, when that wasn't enough, to Chartis. Auto insurer 21st Century doesn't even acknowledge its AIG parentage in its ads, except in print so small that it equates with reading a drug company's "risk factors."

So not doing an IPO of Chartis is a non-event. What would be eventful is if Benmosche, who has some experience running a property casualty company at MetLife, would find a way to make this money-losing unit profitable. For the last quarter, AIG's property casualty division reported a 13 percent decline in net premiums. Nor do things look much better throughout the industry, where net premium growth fell 4.5 percent to a new record low, according to the Insurance Information Institute. Is it any surprise that no one is chomping at the bit?

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