In 2005, Greenberg stepped down from his job amidst regulatory
probes of alleged accounting fraud. After 37 years at the helm, he left
behind a sprawling financial services empire with dozens of business
units, diversified across a range of sectors, each with its own name
and branding. For example, there was Nan Shan Life, a Taiwan life
insurance business; AIU, its foreign commercial insurance division and
International Lease Finance Corporation, the world’s largest aircraft
leasing company. Faced with a house of relatively unknown brands, the
parent company decided it was best to consolidate the conglomerate’s
brand offerings. The intention is to grow AIG’s presence and to enhance
its image as a company that is large, stable and secure.
Sports branding has enjoyed many successes in the corporate world.
It would be a quick and effective way for AIG to drum up its brand
visibility. The sports team chosen was Manchester United, which boasts
hundreds of millions of fans round the world, including an estimated 40
million from Asia – a key market. “We didn’t have good branding outside
of large corporate clients and international brokers. It was fragmented
based on the numerous AIG entities. Manchester United gives AIG name
recognition,” said Kevin Goulding, president of AIG Singapore in a
recent talk at Singapore Management University. The effort was so
successful that some people actually thought AIG owned the football
club. “The true exposure to Asia may have been a second thought, but
the opportunities are endless based on the fan base. You want consumers
to recognise the name and feel comfortable that it’s a large, stable
entity, and that their money is safe,” Goulding added.
Forced by massive writedowns, AIG recently posted a loss of US$99.3
billion for the last financial year – one of the largest in corporate
history. Its market value is down by some 97% since its pre-crisis peak
of more than US$69 in October 2007. Yet, deemed too big to fail, AIG is
now clinging on to a US$182.5 billion lifeline, courtesy of American
taxpayers. This unfortunate turn of events have put AIG’s brand
consolidation plans to halt. Under terms of the 2006 sponsorship
agreement with Manchester United, AIG was to pay US$107 million for a
four-year deal in which the company’s initials would be emblazoned
prominently on the jerseys of the Red Devils, watched by millions of
fans worldwide.
Brand value
Besides the obvious show and elevation of its brand, AIG had much to
benefit from the sponsorship of Manchester United. The close
association with a hard-charging, chart-topping football team had
somewhat instilled a “culture of winning” within the company. Many AIG
employees themselves are big fans of the club as well. The internal
enthusiasm for the sponsorship deal was made clear, for instance,
through the proud display of giant Red Devils posters at AIG’s offices.
“In some strange way, it has helped with employee loyalty,” said
Goulding.
Of course, as a bottom-line oriented business, there is a need to
justify spending and investments in quantifiable terms. The key measure
AIG had of this investment came in the form of an annual joint study of
the top 100 global brands by Business Week and InterBrand. Previously unranked, AIG made its debut in the 2007 report at the 47th
position, sandwiched between luxury goods maker, Gucci, and Ebay. Its
brand value was estimated to be worth a whopping US$7.49 billion. “The
insurer is pushing harder to make a name. Its sponsorship of Manchester
United puts AIG in front of millions of fans throughout Asia and
Europe,” the study noted. “It was an amazing leap in brand
recognition,” said Goulding.
Unfortunately, the financial crisis, which was already simmering in
the summer of 2007, came to a boil in 2008. It took a toll on AIG and
its branding efforts all too quickly. In the 2008 study, the AIG brand
was assessed to have slipped 6%, bringing its value down to US$7.02
billion. Its ranking fell seven places from 47th to 54th.
“The negative press surrounding the US financial services industry, as
well as AIG’s infighting and slowness to acknowledge errors publicly
has damaged the brand, relative to more agile competition. AIG is on
the defensive, with less effort being spent on rebuilding its
diminished image and a renewed focus on its balance sheet,” states the Business Week / InterBrand study.
Brand equity aside, AIG had bigger problems to tackle. Millions of
American taxpayers were furious with the company, as the media reported
on the large pools of bonuses paid out to AIG employees. With the very
survival of the organisation in question, coupled with a colossal
public relations disaster, the sponsorship of a football club would
surely have to take the backseat. “The American taxpayers have an 80%
interest in AIG. Sponsoring Manchester United then has obvious
concerns,” said Goulding, adding that AIG has many tough questions to
ask itself: “Do we continue with the sponsorship, or not? Do we invest
in this or not?” The sponsorship has brought tangible benefits to the
company. In January this year, the decision has been made – at least
for now, that the sponsorship will not continue once it expires in May
2010.
Meanwhile, AIG’s current public image is damaged. “We are in a bit
of branding crisis,” said Goulding, referring to outrage over AIG’s
decision to honour its contractual obligations to pay a group of
traders in its vilified financial products unit a bonus pool of some
US$165 million, even as it is the recipient of US$182.5 billion in
American taxpayers’ money just to stay alive.
Outrage
From President Barrack Obama to senators to market commentators to
Main Street America, it was a competition of the harshest words.
“Resign or go commit suicide,” said US Senator Charles Grassley to
those who took the bonus money. “I am as mad about the bonus as
everyone is. This is offensive. I can tell you most members of AIG are
also mad,” said Goulding, referring to the angry emotional state of
many AIG’s employees. “We are all over the press in a very negative
way. There is no way one can win in the press, but there’s a lot more
truth out there that was not reported,” he added. Goulding told of how
AIG secretaries were being harassed in the subway system while
commuting, and of a long-serving AIG employee – whom Goulding knows
personally, looking on helplessly, as his retirement pension disappear.
With the company’s overall reputation under siege, there is no need
at this point to mince words, and neither did Goulding. “The reputation
is definitely damaged. A former CEO said last year that there will be
no material risk from the subprime crisis. Part of our reputation was
based on a stellar triple-A ratings. We were dominant in terms of
quality.”
Less than a week after Goulding’s talk on March 19, 15 out of the top 20 bonus recipients gave back US$50 million.
Keep your powder dry
Major steps are being taken to salvage the company; that includes
campaigns to highlight some positive aspects to the stakeholders. “Our
assets cannot be touched by AIG because of the regulatory framework
that exists both in New York and Singapore,” said Goulding, referring
to the kind of assurance that the company has been giving to its
customers. “We also have found that the face-to-face intermediaries are
essential in maintaining the trust our clients have with us. Although,
more work needs to be done in repairing our reputation,” he added.
AIG is selling various business units to raise funds to pay down its
debts. There are also plans to spin off its property and casualty unit,
the main chunks of the AIG business, into a separate company called AIU
Holding Inc. The new entity will have more than 44,000 employees, some
40 million existing customers and a product portfolio of some 500. This
new entity will include AIG’s International General Insurance
operations and Commercial Insurance operations within the United
States. With revenues of US$45 billion for the year ended Dec 2008 and
US$43 billion in equity, AIU Holdings is at a size that will place it
Number 54 on the Fortune 500 list.
Over here, AIG’s Singapore operations, despite the economic
slowdown, had a record year in 2008. Financial discipline is as strong
as ever, with Goulding even signing off $5 expense items personally.
This is clearly not something Goulding wants to brag about.
Nevertheless, with the on-going hit on the company’s brand and
reputation, he feels that there is a need to get a message across that
the Singapore businesses are doing fine. To that end, AIG Singapore
recently hired a public relations agency.
With so many criticisms hurled at AIG in the recent months, the
challenges facing AIG’s public relations representative are huge. John
Davis, marketing professor at Singapore Management University, believes
that it is best for the company to wait for the on-going storm of
negative publicity to blow over, before any attempts to sing a positive
tune. “Keep your powder dry,” said Davis, in reference to his advice.
Any efforts to address the public at the moment will likely be futile,
as negative sentiments have flooded all the through into the mainstream
consciousness.
Meanwhile, there is a part of Manchester United that perhaps AIG may
want to emulate. In one of the darkest moments in the club’s history,
eight players were killed in a plane crash at Munich. That happened in
1958. The following season, the club bounced back from that disaster,
finishing a credible second. Will crisis-wrecked AIG be able to rise
from the ashes just as Manchester United did? The American taxpayers
would certainly hope so.
