WHEN: Today, Tuesday, May 3rd
WHERE: CNBC's "Squawk on the Street"
Following are excerpts from the unofficial transcript of a FIRST ON CNBC interview with AIG CEO Peter Hancock on CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET) today, Tuesday, May 3rd. Following is a link to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000514595.
All references must be sourced to CNBC.
HANCOCK ON HEDGE FUNDS
THESE HEDGE FUNDS ARE ABOUT 11 BILLION IN TOTAL AT THE END OF LAST YEAR OUT OF A TOTAL INVESTMENT PORTFOLIO OF ABOUT 350 BILLION. SO A RELATIVELY MODEST PORTION, BUT MORE VOLATILE THAN THE OTHER MORE DEFENSIVE INVESTMENTS. AND OVER THE LAST 20 YEARS THAT WE'VE BEEN INVESTED IN THIS ASSET CLASS THEY HAVE DONE REALLY WELL FOR US. BUT IT'S OUR BELIEF THAT GOING FORWARD IT'S GOING TO BE MUCH LESS ATTRACTIVE…IT'S PART OF OUR STRATEGY TO SHIFT THE RISK OF AIG AWAY FROM INVESTMENT RISK TO OUR CORE COMPETENCE, WHICH IS INSURANCE RISK.
HANCOCK ON FIRST QUARTER
WE LAID OUT A PLAN TO IMPROVE THE OPERATING MARGIN AS MEASURED BY ACCIDENT YEAR LOSS RATIO. THAT IS THE AMOUNT YOU PAY IN CLAIMS AS A PROPORTION OF THE PREMIUM YOU GET IN OVER THE NEXT TWO YEARS TO IMPROVE IT FROM 66 TO 60. AND WE WERE ABLE TO DELIVER 1.7 POINTS OUT OF THAT 6-POINT IMPROVEMENT IN THE FIRST QUARTER. SO WE THINK WE'RE OFF TO A GREAT START IN THE COMMERCIAL UNDERWRITING MARGIN IMPROVEMENT. AND ON THE EXPENSE SIDE WE'RE PLEASED THAT WE HAVE BEEN ABLE TO REDUCE GENERAL OPERATING EXPENSES BY 5% YEAR ON YEAR.
HANCOCK ON BUYBACKS
WE CERTAINLY THINK THAT DIVIDEND IS AN IMPORTANT PART OF OUR CAPITAL RETURN STORY. WE RAISED THE DIVIDEND LAST YEAR. WE HAVE A DIVIDEND YIELD THAT'S SORT OF VERY MUCH IN THE PACK NOW, BUT WE THINK THAT WHILE OUR STOCK TRADES AT A DISCOUNT INTRINSIC VALUE AND ALSO AT A BOOK VALUE, WE THINK THE BUYBACK ROUTE IS THE RIGHT WAY FOR THE TIME BEING. BUT WE'RE NOT WEDDED TO IT.
HANCOCK ON ICAHN/PAULSON
TO BE CLEAR. THEY HAVEN'T JOINED THE BOARD YET. THAT WILL BE AT THE NEXT BOARD MEETING. BUT WE CERTAINLY HAVE STEPPED UP THE LEVEL OF INTERACTION AND TRANSPARENCY. I'M HAPPY TO SAY, WITH A GREATER ENGAGEMENT, WE'RE FINDING A LOT OF COMMON GROUND. AND I THINK WITH A LARGE HOLDING IN AIG STOCK, THEY'RE TOTALLY ALIGNED WITH WHATEVER IT TAKES TO IMPROVE THE LONG-TERM VALUE OF THIS COMPANY, WHICH IS ALL ABOUT IMPROVING OPERATING MARGINS, BEING MORE CAPITAL EFFICIENT AND FOCUSING THIS COMPANY WHERE IT CAN WIN.
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