American International Group (AIG) announced this week that it plans to partner with Stone Point Capital LLC to form an independent managing general agency (MGA) to serve high net-worth and ultra-high net-worth markets.

Stone Point Capital LLC is a private equity firm focused on investing in businesses within the global financial services industry. AIG's Private Client Group (PCG) business will move to this new independent platform and be rebranded as Private Client Select Insurance Services (PCS).

“As previously disclosed, AIG has been exploring structures that, over time, will allow PCG to be supported by third-party capital providers, including AIG and its innovative syndicate at Lloyd's, referred to as Syndicate 2019," said Peter Zaffino, chairman and CEO, AIG. “By partnering with a world-class private equity firm like Stone Point, we can maximize the strengths of this business and improve product offerings to better serve the high and ultra-high net-worth markets."

In February 2022, Zaffino referenced plans to move AIG's high net-worth homeowners business out of the admitted market, noting that the increased frequency and severity of natural catastrophes were a large factor.

“Currently, the level of reinsurance we purchase and the commensurate modeled ceded profit is a headwind to net premiums written growth and combined ratio improvement," Zaffino said in a conference call later in 2022. “This has been intentional as we are not willing to take volatility on frequency or tail risk on cat in our high net worth business. Adding to this, the inability to pass on increased loss and reinsurance costs through rate increases or limit management largely due to regulatory constraints further deteriorates margin in the short run."

“But we have made a deliberate decision to continue writing this business as we believe the trade-off is appropriate in the near term given the opportunity we see over the long term," he continued.

PCG personnel, including the experienced leadership team led by Kathleen Zortman, PCG's president and CEO, will transfer to the MGA once it is formed.

“We are excited to be entering this partnership and look forward to building a top-performing MGA committed to excellence in the attractive high and ultra-high net-worth markets," said Jim Carey, managing director of Stone Point. “I am confident that Stone Point's experience in the insurance industry, coupled with AIG's risk management expertise and product knowledge, will create significant value for all stakeholders."

Completion of the proposed transactions among AIG and Stone Point is subject to the negotiation of definitive agreements, obtaining required permits and regulatory approvals. The terms of the transaction have not been disclosed.

AnneMarie McPherson Spears is IA news editor.