AIG: The Name is Back

Alexander is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Rebranding is a tool many companies employ as they seek to improve their public image by distancing themselves from previous actions and impressions. This is often accomplished by creating new symbols, slogans, or even creating new brand names. Few companies provide a better example of this than American International Group (NYSE: AIG), whose taxpayer-funded bailout, coupled with millions in executive bonuses and lavish trips, attracted nationwide ire. But as AIG begins to rebuild itself, its brand image is being rebuilt as well, enough that the company is planning to use it again.

A Scramble for public image
When AIG was restructuring in an effort to repay government loans and appease taxpayers, it took the opportunity to rebrand its property and casualty unit as well as its life insurance unit. The names Chartis and SunAmerica distanced the core insurance units from the image of casino-style wheeling and dealing that the public hated so much.

Some may criticize the rebranding of these subsidiaries as unnecessary, but one has to grasp the extent of the public's hatred at the time. Reuters reported that in early 2009, an AIG employee opened an umbrella with the company logo, only to have someone break the umbrella before making offensive remarks to the employee. Management recommended employees travel in pairs for safety, and even replaced the logo on the employee badge to eliminate the AIG name.

The New AIG
With its latest share offering, the U.S. government's stake in AIG has been reduced to 15.9% after the underwriters exercised their options. As a bonus, the Treasury is estimating a profit of over $15 billion, an amount likely to grow after the next, and possibly final, share sale. This has helped to repair the tarnished image of AIG, since it is no longer "the government-owned insurance company."

The value of a brand name is critical in insurance, because it lends security to the chances that the company can survive and pay in the event of a claim. Insurers like Metlife (NYSE: MET) and Prudential (NYSE: PRU) had the advantage of branding over AIG; unlike the latter, neither Metlife nor Prudential received a government bailout. These companies were able to use their names as assets, instead of having to rebrand.

As a result, they looked  better in comparison with AIG or the unfamiliar names of Chartis and SunAmerica. Metlife and Prudential also gained from AIG's downfall, as government and taxpayer pressure encouraged AIG to sell ALICO to Metlife, and two of its Japanese units to Prudential, allowing the companies to grow as AIG shrank.

Undoing the damage
In AIG's efforts to rebuild itself as a company, it has not only rebuilt its balance sheet, but also its corporate image. The public now views AIG as a large and safe insurer, rather than a king of casino avarice. Competitors have gained a foothold into AIG's competitive business, but the company is coming back strong, and positioning itself to capitalize on its reconstructed image. This cannot happen overnight, but as time passes and AIG completely emerges from government ownership, the brand name should become even more valuable. And based on AIG CEO Robert Benmosche's decision to use the AIG name again, the name is already a positive.


TulipSpeculator1 has no positions in the stocks mentioned above. The Motley Fool owns shares of American International Group and has the following options: long JAN 2014 $25.00 calls on American International Group. Motley Fool newsletter services recommend American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

blog comments powered by Disqus