With AIG CEO Peter Hancock on his way out the door after failing to reverse the insurer’s fortunes, some see the board turning to an outside replacement rather than an internal candidate in what could be a fairly focused search process.

“In a situation like this, it wouldn’t be surprising if the board is fairly set on finding somebody from the outside to get a fresh start,” said Greg Jacobson, co-chief executive officer of insurance industry executive search firm The Jacobson Group.

“Oftentimes, internal candidates are considered along with external candidates,” Jacobson told Carrier Management, speaking generally about CEO successions similar to Hancock’s situation. But “a message to the market of seriousness in changing the company’s fortunes is often made through the hiring of an external person.”

American International Group disclosed on March 9 that Hancock had submitted his resignation letter to the company’s board of directors. He’ll stay on until a successor has been named, and board members are expected to “conduct a comprehensive search for a successor to Hancock,” AIG said.

Hancock, who took the AIG CEO slot in 2014, faced months of pressure to reverse the insurer’s fortunes and came up with a two-year plan to return up to $25 billion to shareholders from 2015 through 2017 and streamline operations.

Activist Investor Carl Icahn pushed for Hancock to split AIG into three sections. Hancock resisted this and instead focused on streamlining AIG through actions such as the sale of its mortgage arm to Arch Capital Group for $3.4 billion. But AIG failed to meet financial targets, most recently with a $3.04 billion loss in the 2016 fourth quarter due to higher-than-expected claims costs.

No More Investment Bankers?

Meyer Shields, an analyst with Keefe, Bruyette and Woods, said that the AIG board might be better off turning this time to a leader with a straight property/casualty background. Hancock is a former J.P. Morgan & Co. executive who first joined AIG in 2010. Then-CEO Robert Benmosche put him in charge of the insurer’s property/casualty unit a year later.

Peter Hancock, chief executive officer of AIG Property Casualty Inc., speaks during a TV interview on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Tuesday, Jan. 26, 2016. Photographer: Michael Nagle/Bloomberg

Shields said Hancock had plenty of good qualities, his career “showed moments of brilliance,” and he was good at quantifying “risk assessments from a statistical or stochastic perspective.” But Shields wondered if Hancock was missing understanding of P/C industry nuances that a seasoned veteran might have.

“Ultimately that’s the issue, the understanding of non-numerical parts essential to running a good underwriting company,” Shields said. “You can’t necessarily see them in the numbers, and that is probably the point that was missing and why AIG should be looking for someone [to replace Hancock] who grew up as a property/casualty underwriter.”

Who could Hancock’s replacement be?

Shields said finding a good successor to Hancock will be challenging.

“What we’re talking about is a very large, complicated and distressed company,” Shields said. “There aren’t hundreds of people around the globe that inspire confidence that they’d be able to do it. [It’s a] very small group.”

Shields mentioned that names being tossed around include Brian Duperreault, CEO of Hamilton Insurance Group and a former ACE (now part of Chubb) and AIG executive himself, who was also CEO of Marsh & McLennan during a period after the 2008 financial crisis where the firm needed a focus on righting the ship. Other names Shields has heard bandied about: XL Group CEO Mike McGavick and Constantine Iordanou, chairman and CEO of Arch Capital Group (which bought AIG’s mortgage division).

Iordanou “has done a fantastic job with that company,” Shields said of his job running Arch, and is “someone that understands underwriting from the inside and out.”

Julie Burke, head of North American Insurance for Fitch Ratings, said AIG will likely conduct a thorough, wide-ranging CEO search.

AIG’s Turnaround Plan May Not Change Much

“I suspect they are going to cast a pretty broad net, both internal and external candidates,” Burke said. She added that Fitch believes the ongoing turnaround strategy put in place by Hancock “is not expected to change.”

“It is just a matter of getting someone in place that can perhaps, from the shareholders’ perspective, better execute the strategy,” Burke added. She noted that AIG “is a complicated organization” with commercial and personal lines, property/casualty and life insurance all part of the equation, adding to the CEO search challenge.

Jacobson, speaking generally, said that if board members conduct proper succession planning, they typically know which search firm they want to use in advance. What’s more, a board in this situation often has some external candidates already in mind.

“They likely have a short list of potential external names and have an understanding of strengths and weaknesses of internal candidates, and it can make the process fairly expedient,” Jacobson said. “That said, I would expect something like this is going to take at least three to six months.”