OLIVER RALPH AND ALISTAIR GRAY

For part of that time it served as headquarters for Hank Greenberg, the chief executive who drove AIG into new markets until it became the dominant force in insurance.

Today 70 Pine Street is a luxury apartment block. AIG, with Mr Greenberg long departed, has slunk off a couple of blocks down the road to an altogether more humdrum building. And after over a decade of crisis AIG is a shadow of its former self, having sold off large chunks of its business.

Yet in January it spent $ 5.6bn on its first purchase in a decade, with a hint of more deals to come, and has used the past 12 months since Brian Duperreault arrived as chief executive to recruit a new management team and shake up the way it operates. It is all designed to restore some of the company’ s swagger.

“ AIG is like a supertanker with a very small rudder, so it is a nightmare to turn around,” says industry veteran Stephen Catlin. Adding that he thinks Mr Duperreault“ is about the only person you’ d trust to do it”.

The insurer has been under sustained pressure for most of the past 15 years. It lurched from Eliot Spitzer’ s accounting investigation that resulted in a $ 1.6bn settlement in 2006 to needing a $ 185bn government rescue two years later just to survive at the height of the financial crisis.

It has repaid the taxpayer bailout, partly via asset sales. At its peak, the insurer

was worth $ 240bn and had a triple A credit rating. It is now worth about a fifth of that and Fitch rates it A-, six notches lower. Activist investors Carl Icahn and John Paulson agitated for a wholesale break-up of the group as recently as 2016.

Mr Duperreault, 71, who spent more than 20 years at AIG earlier in his career, has already tried to retire from the industry twice, but the pull of AIG was too great to resist.“ I still bleed AIG blue,” he tells the Financial Times,“ it’ s still part of who I am. My formative years in the business were all here.”

Yet despite his arrival giving the company a lift, its share price remains under pressure, with investors wary about the speed of any turnround. And Mr Duperreault will have to deal with this scepticism against the backdrop of an industry struggling to increase premiums despite a series of natural disasters. At the same time a surplus of capital, a byproduct of low interest rates, has kept prices low.

“ The market is quite difficult,” says John Heagerty, analyst at Atlantic Equities.“ Pricing has improved, but not as much as people had hoped... I think it’ s going to take a long time to turn it [ AIG ] around.”

One of Mr Duperreault’ s priorities has been recruitment. During the crisis and its aftermath, AIG haemorrhaged staff, with some of the brightest in the industry walking away while many others were laid off.“ We had to establish that we were a place where talent comes [ again ],” he says.

He has lured a host of senior industry figures, many of whom he worked with in roles at ACE, Marsh & McLennan and Hamilton, as well as at AIG itself.

Peter Zaffino, the former head of insurance broker Marsh, was hired last year as chief operating officer running the

general insurance business. He is seen by some in the industry as Mr Duperreault’ s heir apparent. Tom Bolt, a former Lloyd’ s of London executive, was poached from Berkshire Hathaway.

Some have been lured by a promise of more independence, a nod perhaps, to the era of Mr Greenberg and his predecessor Cornelius Vander Starr, both of whom gave employees a high degree of autonomy. In Fatal Risk, his book on AIG’ s crisis years, the journalist Roddy Boyd notes that:“ Fifty years before Peter Drucker and other management gurus by the boatload would preach decentralisation... Starr made it the centrepiece of his managerial style.”

Mr Duperreault has taken those principles to heart.“ The AIG that I knew was a collection of specialists, individuals who really knew a particular subject matter as

such as catastrophe bonds.

The deal also brought in fresh underwriting talent.“ Validus brings expertise in underwriting property risk, including catastrophe risk, and has a good record of performance,” says Bruce Ballentyne, an analyst at Moody’ s.

Yet it has upset some. The price tag has drawn criticism: AIG is paying a premium of 45 per cent to Validus’ s share price before the deal, and one banker says that it has paid“$ 1bn too much”.

Others are unhappy that the deal is being funded with money that might otherwise have been used for shareholder payouts. Mr Duperreault’ s predecessor, Peter Hancock, had planned to return $ 25bn over two years via buybacks and dividends. But Mr Duperreault has made clear that he would rather deploy the

The former AIG headquarters at 70 Pine Street in New York © AFP

well if not better than anybody else,” he says.“ I’ ve found that the AIG I returned to had lost some of that.”

He also returned last year to an AIG that had become a selling company. Since the crisis business units from AIA, the Asia operation, to a company ski resort in Stowe Mountain have been jettisoned. The downsizing was encouraged by Washington.

Regulators restricted the company’ s growth because they deemed it a“ systemically important” financial institution. But last autumn, as part of the Trump administration’ s deregulatory agenda, it rescinded AIG’ s“ too big to fail” status.

Just four months later, the chief executive followed through on his plans to expand the business with a $ 5.6bn deal to buy Bermuda-based Validus. The deal adds business areas AIG had never been in, or had exited, including Lloyd’ s of London, reinsurance and the fast-growing market for“ insurance linked securities”

resources to expand.

“ A company should have a growth strategy. Otherwise, you’ re a shrinking company, and that probably isn’ t going to work out well for you at the end of the day,” he says.

Despite the hires, the acquisition and talk of a more positive mood around the company investors remain sceptical. AIG’ s share price has wilted since last May, down 14 per cent against a 14 per cent rise for the S & P 500 over the same period.

“ Most investors I talk to think if there’ s anyone who can fix this thing it’ s going to be Duperreault and the people he’ s bringing in,” says Paul Newsome, analyst at Sandler O’ Neill.“[ Yet ] the stock price suggests a lot of people think it’ s not going to happen very quickly.”

Part of the reason for the share price fall may be the scaling back of share buybacks, but there are more fundamental problems. AIG has long avoided the kinds of financial products, such as credit default swaps, that

turned toxic in 2008 and led to its bailout. Today, it is the traditional property and casualty insurance business, which accounts for almost two-thirds of revenues, that is the group’ s big anxiety.

In particular, AIG has struggled to generate a profit from business insurance in the US. It covers a wide range of commercial risks, from workplace injury claims to clean-up costs from environmental damage, but policyholder claims have proved to be higher than anticipated at the time the policies were sold, forcing AIG to boost its reserves. As a result the company has booked some of the biggest reserving charges in the industry’ s history.

At the end of 2015, it added $ 3.6bn to sums earmarked for claims payouts. A year later, and to the anger of investors, the company took an even bigger reserving hit of $ 5.6bn.

The company’ s difficulties stem partly from decisions taken years ago. Problematic policies sold by AIG, such as professional liability and workers’ compensation, are known in industry jargon as“ long-tail”, leaving the insurer on the hook for potential liabilities years into the future. And while other companies sell similar policies few have had the same scale of problems as AIG.

“ In some lines [ types of insurance ], management wasn’ t conservative enough; in other places it was bad luck; in other places it was underpricing,” says Mark Dwelle, analyst at RBC Capital Markets.

Some point the finger at policies AIG sold during the financial crisis when it was faced with an uncomfortable choice: sell the insurance more cheaply than its better-rated rivals, or give up business. In many cases, say analysts, it chose the former. One person familiar with the company says AIG was at the time taken advantage of by savvy corporate insurance buyers exploiting the“ internal disarray” by securing cover from the company at attractive terms.

Others argue the problems date back even further, to the company’ s rapid expansion in the late 1990s. The scale of the mispricing only became clear several years later, when claims started to roll in.

For all that AIG’ s modern managers have been bound by the decisions of the past, analysts say more recent executives also share the blame. More than half of the $ 5.6bn reserve charge AIG took last year was due to losses on policies sold since 2011, for instance.

Mr Duperreault has said he expects the troublesome general insurance business to deliver an underwriting profit by the end of this year.