There we go. We're on. We're really pleased to have Robert Benmosche here to talk about AIG. Obviously, always newsworthy, the last four or five days, exceedingly so. I'll let Bob say initial remarks, I'll ask a few questions, and really, I'm sure the audience has more questions I can imagine. Bob.
Yeah, I guess, first of all, it's always nice to have some things going on just before we have a meeting, and it helps the attendance of this group. It's always good to have something happening, but I'll wait for your questions to deal with that. The main thing for AIG, it's important because we say it over and over and over again, and people have a difficult time accepting it. That is that AIG made it through the crisis. We talk about where you were in 2008, and in 2008, most of you in this room would have said, most of us in the room, me included, that it looks like they're on a path that's just going to blow themselves up.
When I looked at what happened in March of 2009, I was sure that was the end, that they were never going to be able to recover from the attitude of Congress, the attitude of regulators, and the attitude of some of the people who were dealing with AIG and its problems inside the company as well. We've gone through this difficult period of time, and what we said was, during that time, people in the property casualty business in particular should have been raising rates, but they weren't. Instead, what you heard from the marketplace was that AIG is giving away the store. If we're giving away the store, you would expect the reserves to be a huge issue of this company.
In fact, what we've said over and over and over again, while there were some issues of future medical inflation and some other things that occurred in 2009 and 2010, which you saw in the reserve, that basically the underpricing really wasn't done. It was not willing to do price increases because they were worried about if they raised the price and they lost the account, you would think, the investing public would think, that AIG is losing business because of its reputational issues, not because they don't believe they're getting a fair price for the risks they're putting on their books. There was a reluctance to lose accounts by raising rates. As you go through this period of time where we've gotten 2012 behind us, we said that we were fixing the foundation.
If you look at the first quarter of 2013, we have in fact had one quarter, plus many other quarters, if you look at underlying results, where we're consistently showing improvement, especially the loss ratio in the property casualty business in particular. Heard a lot of stories about, we said, gee whiz, interest rates are coming down, that's going to be a problem, and so on. What we said is that a good part of the business at AIG is fixed annuities, you've got asset liability matching, you have duration, the reinvestment risk off of a big life portfolio is not the same for AIG as other insurance companies. We've said that.
Part of your challenge as we go forward is to say that AIG did make it through the crisis, that the franchise is very much intact, that we're back in every single distribution system. Everyone is loving the name again, which we said, by the way, many of you heard this three years ago, that AIG's name is forever tarnished and will never come back in the marketplace. In fact, today, I must tell you that corporations have said it's a pleasure to see AIG back. Why? Because it's their signal that AIG is actually strong and back to what it was before to be the kind of company they can rely on. We still do business with 98% of the Fortune 500 alone. It's all intact, and now we're getting the benefit of fixing that foundation.
That's pretty much what you saw in the first quarter. As I said, it's what you saw mostly throughout 2012, I think we're ready to continue to move forward. Other than what I said, maybe if you all just lean a little closer, I'll whisper about how the quarter's going. We would all go to jail, so I can't tell you anything about the quarter. It's up to you. Turn it over to you, Josh.
Well, I don't know what you can say. I'll say ILFC, and in many ways let you answer. People would like to know what happened last week, what you know happened. How confident are you that maybe the consortium of investors who want to buy it may come through with a deposit in the coming days? What it means for your view of capital management at the firm over the next six months, not necessarily the next couple of years.
Let me start off with ILFC. Clearly, it was a very complicated transaction in the beginning. We went through and laid out the steps in the agreement of what has to be done. One of the things in the agreement says they need to make a deposit at a certain point in time. They did not make that deposit at a certain point in time. If they make that deposit, we will report such. We also said publicly that we moved the closing date because of the complication of getting through all appropriate regulatory authorities, that we would expect that we could move our date to June 14th. We're moving towards June 14th. We have not terminated this contract at this point in time. We had a right to do so. We'll see how it proceeds.
It's a very complicated situation. We're dealing with, during this period of time, keep in mind, we've gone through regime change in China, 10-year regime change. You've got all new players now coming in place. You see what happens when you go through that. You're dealing with a complicated property between two complicated governments. That's pretty much where we're at. As far as capital management is concerned, what we've said is the ILFC transaction is not about raising cash to buy back shares. What we said is it's most important to de-risk the company. This is about simplifying AIG, having a company that is manageable, in my opinion, and is around insurance. Not how to begin to get extra yield on some of the investments we can make as a company, leveraging what used to be the triple A of AIG. ILFC doesn't fit.
It's non-core to AIG. We still see it as non-core. The transaction we're working on is to de-risk it. It could mean if this deal didn't get done, we still the option of an IPO, but the IPO has to be where we feel pretty confident we could deconsolidate, which would be more than 51%. That's a de-risking transaction, and it's a simplification. It allows the rating agencies to understand our commitment to deal with our core businesses, eliminate the non-core activities, and therefore de-risk the company so they're confident in our credit ratings. You saw we got some improvement. We're continuing to see improvement, but we got to continue to make progress on getting back to a very, very well-rounded, well-run insurance company. That's pretty much how we see ILFC.
Once we're confident that the rating agencies are satisfied, we can proceed with capital management beyond what we're doing right now, which is our debt management. We're working hard on reducing the coverage, dealing with improving the coverage ratio. It's a combination of improving operating results, and it's also reducing the amount of debt we have. That is still our highest priority. We said that once we've satisfied that and we're comfortable we've de-risked AIG to the right point, we want to focus on a dividend, and we also want to be able to start focusing on a modest buyback program.
You've said last night the Fed formalized its decision to name AIG as a SIFI. You've said that if named, you would not fight the appellation, although it is AIG's right to do so. You must have thought about the options and thought that the risks associated with being named a SIFI aren't worth fighting over. You must have a timeline in your mind. Now that the formal decision has been named, what do you think the progress is on the Fed understanding what it means when it says you're a non-bank SIFI and what that means for your capital and its formalization with its own understanding of guidelines you'll have to follow?
Look, let me start with the fact that we had a crisis in 2008. We'd like to say insurance companies are exempt, but I remember the days of Executive Life. I remember the days of Baldwin United. Some of you in this room may not know what I'm talking about, but some of you, I look around, and I can still see you're old enough to remember those days. We've come through a financial crisis, and therefore it's a question of confidence that financial institutions can run themselves effectively and that they're doing it in a way that the regulators are assuring the American public, as represented by members of Congress and the Administration, that the taxpayers will not have to stand up and bail out companies ever going forward.
That's the challenge we all have, and it's still as raw and as severe as it was three, four years ago. When we think about regulations and regulators coming and talking to all of us, we have to absolutely demonstrate that we are running companies the right way. Let's go back when I was on Wall Street in the 1980s. It was very important to have a New York company to sell a fixed annuity from. Why was a New York company so important? Because it was the most difficult, most effective regulator that had all kinds of requirements that said all the other states would allow you to do more than New York, and therefore you could get a better yield out of the non-New York companies because of what New York required for the safety of the policyholder.
That's what we need to now think about as we think about where the industry is going, insurance, as well as financial services. At this stage of the game, as we think about where we are, somebody has to be looking at AIG in total. People still struggle with this. We're regulated by New York. We're regulated by Texas. We're regulated by California. We're regulated by Japan. I could take it to 90 countries, and I could take it to 50 states. The fact is, who's looking at it all together? Who's looking at the AIG holding company? If you look at what we have as resources at the holding company, we have more at AIG than any other insurance company that I'm aware of.
Probably the only one that has more sitting around, I know people worry about competition from Berkshire, but somehow Berkshire is a competitor, but they're not an insurance company. I think they're pretty big. The last time I looked, right, they're pretty big? I don't know. They say big companies that are in the insurance business should be regulated, but I guess somehow they're not. Anyway, having said that, we look at AIG-- That's a little bit of frustration. As we look at what's starting to come down to a SIFI, for me, it's important that somebody look at our holding company to assure the public that we are not doing anything that could jeopardize the underlying companies.
That's why GE and others are in this together, is that you got to make sure that you don't put those companies in jeopardy and ask the taxpayer to bail them out. Somebody's got to make sure we're not doing anything that imprudent. That's why we have to do stress tests. That's why people have to look at how our stress tests are done. Look, these stress tests are done at the CUSIP level. At the CUSIP level. This is not summary data. This is people feeding giant amounts of information into computers, running through very extensive, very sophisticated models to say, "If the world goes to hell in a handbasket, can you survive without coming to the government for support?" As I look at this reality for AIG, I look at the criteria, we could actually argue that we don't fit.
The fact is somebody's got to regulate us globally, and therefore the Federal Reserve, in my opinion, is as good as an institution as any to come in and look at AIG and make sure we're doing all the right things the right way and that things come together. Keep in mind, we have almost nine full-time people now going through AIG at a very granular level. It's going to put a discipline on AIG that we're not used to. I've had experience in banking, I've had extensive experience on Wall Street and, of course, in the insurance industry. When it comes to banks, they actually reconcile things before they do them. You don't get to submit stuff and say, "Okay, we're close.
Let's run the balances through the client DDA statements and so on." When you come to Wall Street, we do that in some instances, unless you're doing a trade. In the good old days, for those of us who remember, we used to have to deal with no-name accounts. Why? Because when you got a market order, you put the market order in, you don't have market exposure, and you figure the rest out later when you get a chance. That's why the floors would have people going through QTs and so on down the line, because it's a little bit of after the fact. Insurance companies are just way after the fact. Everything gets processed in suspense accounts. We have some policies. We have some procedures that match our policies.
When we look at regulators looking at insurance companies, they just want to look at your assets and liabilities and make sure if you do something wrong, there's more assets to cover the liabilities so policyholders are taken care of. The rest of it, they don't worry about. They don't worry about bondholders, they don't worry about stockholders. They worry about the policyholder. From a regulatory point of view, there's a gap, and the gap could be that, yeah, we're solvent for the policyholder, but what effect does it have on the economy and the financial system? Big companies can have a dramatic effect on that. That's why, as I think about SIFI coming in and the discipline it's going to create for AIG, I am confident we're going to make progress.
Keep in mind that to get our systems and our process and our discipline, did you have a policy? You have a procedure that you can demonstrate you followed that procedure. You can say, "Oh, that's bureaucratic," but if you had a risk committee meeting every month, what did you discuss? What did you say you were going to do? How do you know you did what you did? Did you document it? Those are the disciplines the Federal Reserve brings in to make sure that it can be inspected. That's what they want from us. Yeah, it's costly. Look, Sarbanes-Oxley wasn't so terrific either. It wasn't a lot of fun going through that. 404 and all the compliance we have to do even today, it's all about process.
This will take the process to a different level. It talks about stress testing, making sure you have the right systems and processes in place so that something, if it goes wrong in our companies, they're assured that the taxpayer won't have to step in to protect the bondholders, which is a little bit of a problem, and wipe out the shareholders. That's pretty much where we're at. I think that it'd be nice if all big companies who have financial services as part of it get to be in the same arena. I worry about some people who've been left out because that isn't appropriate. Somehow the government has to reconcile what they're doing. On the other hand, from an AIG point of view, I think we're fine. I think we have sufficient liquidity.
We've gone through our simulation of stress testing. We feel that in the end, we'll be within any range that they expect. Long-winded answer, I'm sorry.
Good answer. I'll ask one more question. Open up to the floor. Can you talk a little about the leadership transition, what it means for the company, and what shareholders should be thinking about as they look into the future?
Well, I appreciate you asking how I'm feeling, Josh. I'm feeling pretty good.
That's good.
How's Bob feeling as he goes stick around for a while?
You might be feeling good and that might make you want to leave. You never know.
There you go. I'm actually feeling very good. My health is still holding up, I'm fortunate that my treatments continue to work. What I said to the board, as long as my health continues to hold up, I love what I'm doing. This is an exciting time to be in this industry, it's an exciting time for us to Keep in mind what I've said to some of you rolled your eyes and you said, "Oh, God, the guy is smoking something." I said that AIG was the icon of everything that went wrong in this country in 2008. If there was anything that could epitomize what happened to this country, AIG got it. I said that one day, maybe AIG could become the icon of everything that's right about America. I believe that's happening.
Our thank you campaign to America went over extremely well, people have said, "Geez, amazing what we have done here at AIG," it is amazing what the people of AIG have done to get this company where it is today. It talks about the great company it was before, now it's got enough roots to be able to do that. I feel good about the company. I feel that if my health holds up, that I would like, we said, let's shoot for 2014 year-end, where we'll finish off the year, then I would be around till the first quarter of 2015, signing the 10-K. Somebody's got to sign that 10-K, it would be me. Then I would move on. By that time, I'm over 70 years old, I'm not sure that's the right age.
Although I must tell you that when I was a kid, I thought 70 years old was really old, I'm realizing how young I am today. There's hope for all of you out there. It's really up to the board. If the board feels that things are going on or the company feels that I should stay on longer, that's an option. I'm going to leave it up to them to decide when and how, because I think this is a chance for us to continue enormous progress. If something happened to me tomorrow, I can only tell you that we've done a lot of work in building one AIG, a management team that works as a team. We don't have the kind of egos that many of you in your firms have to deal with.
We still have them, but we managed to put them together in terms of solutions. If something were to happen tomorrow, this board is very prepared. We've gone through extensive review of all the internal candidates. We have people who've done extensive 360s, and the people who are conducting them meet privately with the board to talk about the strengths and weaknesses of all the candidates and what steps we're taking to improve their skills and their performance or their capabilities. The developmental plans are in there as well. Here's their weaknesses, here's how we're improving those weaknesses. I think succession, whether it's tomorrow, next year, or in two years, whatever the case may be, I think you need to focus on the entire management team.
That's why we're getting, Liz is doing a great job of getting our management team out to meet with many investors and shareholders because you got to see the depth and breadth and the talent of this organization. It isn't just about Bob. It really is about the people of AIG.
Perfect. Well, I have plenty of questions, but I think there's a room full of questions here. We should probably get some mics out there and This gentleman in the center here. Can we get some mics over? Thank you.
Thank you. Can you talk about your relationship with PICC and where you see it going in the next two to three years?
As you know, we have our own sales organization in China, we've also done PICC on the property casualty side, a lot of A&H that we've done in China. This gives us a chance to work with them in terms of building a life organization as well. We have a lot of experience. In fact, Rick Bender, who's doing that for us now in PICC, is also focused on our life business in Japan. Keep in mind that Japan is our second biggest country outside the U.S. right now for all products. We're now leveraging that experience. He, by the way, ran a lot of the systems at AIA, for example, before we sold it off and Mark Tucker took over. He also ran Nan Shan for us. We've got some good experience here of running career agencies.
They want to, in PICC, build an agency for us and do a lot of life product sales. We're proceeding to do that. I think it's a chance for us to get into that business with a company and a brand that it gives us a lot of way to leverage that relationship. Keep in mind, we have 100% ownership of what we do in China. That's the legacy of Greenberg and the things he succeeded in negotiating. If you really want to grow, we're also going to have to grow where we don't have that significant amount of ownership of what it is we're selling. We think there's great opportunity for us to do well with the PICC relationship with Life.
What are your prospects for growing the VA business in the U.S.? I see you've been gaining some market share there, although you don't have the legacy that some of the competitors may have.
Don't minimize that statement, that we don't have the legacy everybody else has. One of my frustrations as the CEO of another company is that I used to argue with the team that people sometimes die in a bear market. That's unfortunate. If you don't have those guarantees on products, it could be costly. Even though there are people out there who are, Suze Orman in particular has talked about variable annuities being not so good, but they're good when people prematurely die and the market's down. The question is, how do you know when that's going to happen? The public today is looking for more assurances and guarantees to protect them in the future so they don't run out of money before they pass on. It's a huge issue, a huge fear.
At AIG, we've been very careful not to get into the more aggressive pricing and aggressive designs. As a result, if you look at the balance of our business being the 403(b) variable annuities, they're not really variable annuities, but same design concept and risk approach to it. If you look at how they did some of their other product, we just weren't in that arms race. As a result, we don't have the enormous pain that others are beginning to deal with right now. That puts us in a better position. The philosophy of, I think, building the right variable annuity is you start with what's inside the annuity. In the '80s, when we built a lot of this stuff when I was at PaineWebber, we thought about asset allocation. One of the first to do that, stocks, bonds, and cash.
Keep yourself moving and deal with asset allocation so that you're not over-concentrated in one particular bucket so that you don't get to buy a high beta fund in a variable annuity and take a shot. If you miss, that you put a guarantee on it that says at least you have a free life insurance policy, so if you die, you're getting your money back. That's what's happened since the '80s to where we are today. Those kinds of things were allowed. We first, if you look at our SunAmerica group, is we're very careful inside it is what you can actually invest in and what balance you have to have and how much has to be in a fixed account and so on. That's the first line of defense. We deal with having very appropriately priced guarantees on top of that.
That where we look at our product today, our ability to hedge that product cost effectively, knowing that the first hedge was what clients can do and what risks they can put on us above and beyond normal market risk, we feel we've got a lot of capacity to grow here, and the demand for what we do is still pretty high. My sense is that it's going to worse. Look, people are afraid to retire today. You all know the numbers. The average age of retirement is growing two to three years per year in terms of people saying, "Can I afford to retire at 65 or 68 or even 70?" That's causing a problem for the young people who don't get to have the jobs opening up because the baby boomers are hanging on for dear life.
Most people do not want to commit to a lifetime annuity. Nobody wants to give up that kind of control. They're not willing to bet that their life expectancy will be such that it was worth their money to take a commitment for a lifetime income. Therefore, they want an out. They want access to their money, but they want the income guarantees and so on. That's where we are in the last two or three years. That is going to continue. As it continues, my sense is that that's going to be good for our variable annuity business because we don't have the same exposures or legacy others now have to deal with. It's got to be balanced. By the way, we have a strong fixed annuity business as well. That's a good counterbalance. You don't want to be a one-product trick pony.
It's very difficult. Which is why the whole idea of our integrating businesses, people say, "Why do you have the P&C business and you have a life business?" You want to be geographically diverse. You want to be product diverse. You don't want to have all of your risk correlated to the markets. It's an advantage to have hurricanes and wind as an offset to the fixed income markets. That's all part of risk diversification. I think we're in pretty good shape to do that. Well, in terms of We do have one? Oh, great. Yeah, we got one right here. Do we have a mic?
Thanks, Bob. Your target, I think in 2015 is a 10% ROE. Can you talk about how much of that comes from pricing, or is it more of the cutting expenses and improving of underwriting over the next 24 months? Secondly, getting back to the ILFC thing, I know you can't tell us much, but is it safe to say that you're still talking to these people, this consortium? Thank you.
Well, obviously, we have a deal that calls for January 14th close.
June 14th.
I mean, yeah, June 14th, sorry. I didn't give you something that I thought it was just I wasn't thinking. It happens every once in a while. You get tired up here. Anyway, I would say that June 14th, we have to make a decision. Obviously, we've gone through a lot of work together. Common sense would tell you that we would continue our dialogue and continue to work through. Whether this deal will get done or not, we don't know. There's a lot of hurdles to go through. It's very complicated, and we're doing the best we can to see how we get it done. Coming back to our aspirational goals, we're continuing to work towards those. We think that we said already that pricing, we weren't assuming price increases to do that.
We talked about risk selection, getting the combined ratio down by how we write and do business. We have not been very analytic. We've not used predictive data modeling at all. On the consumer side, for sure, it makes sense to do that. You can even do some of that on the commercial side. We're also doing more modeling and data-driven analysis of our reserves and our claims. We said that that's all part of how you get the loss ratio down. What's an example? We knew, and we've been working on, now everybody's catching on to it, but we've been on to it for almost a year and a half now. That because of the stuff we've been doing, that opiates is a huge problem in this country. That drug abuse is becoming a huge issue in this country.
People are desperate for their painkillers, and there was no algorithm process for us to deal with people who we saw that were abusing that. Now that we work with Johns Hopkins, we've talked about our workers' comp claims, our 27 million claims that we've studied. We're coming up with enormous insights into what we need to do to drive people back to work. Keep in mind, when there are not a lot of jobs, that's not an incentive for the employee or the employer. It is for us. Working through the claims, working through this data, we didn't have a really strong fraud group. Our fraud was about a quarter to a third of the industry. It's not because our clients are more honest.
It's because our fraud effort and the using data and data mining wasn't up to the level we needed it to be. It now is. That's driving some of the relief on the reserves. That's what's driving some of our loss ratios on a current action year basis, which you see coming down. Price increases to get to that goal were actually extra. A rise in interest rates would have been extra, which hasn't come yet. We feel pretty confident we're going to get there by blocking and tackling and doing the work we set out to, which is, again, risk selection, managing our claims and our processing, being much more data-driven. We are talking about expense reductions, and we also talk about we had a lot of cash sitting around, it's the reinvestment of that cash, which has already occurred.
Of course, we've done pretty well on our buy of Maiden Lane 2 and type assets as well as Maiden Lane 3. All of that is the strength which we have in the organization. We continue to work towards those aspirational goals, and we feel they're within reach.
Can we talk about the SAP overhaul, where it stands right now?
Sure.
Whether there's an impact on the life side as well?
Yeah, the life side came with a good SAP platform and so on. For the property casualty business, it was really, keep in mind, when I got to AIG, there were 534 general ledgers operating. 4,000 spreadsheets are uploaded into the financials every quarter to be able to close the books of this company. We have out of our 63,000 people of AIG, almost 6,000 are in finance to reconcile numbers that we don't have information. We've had a long way to go to build a whole new platform. We took a lot of money and time to build the entire platform. The whole vertical was done in the U.K. It was done because we believed we were way behind the eight ball and needed to get ready for Solvency II.
Had we known Solvency II was going to be delayed as much as it's been, we probably would have taken a different approach. It's in, it's working, and it's having huge financial benefits for the company. We've changed tack. We're now going to a more simplified role around the world. We're starting with a ledger kind of information at the base of the foundation. We'll get more sophisticated in terms of reinsurance modules further down. We think we will able to reduce some of the costs we're spending as we develop it, and we'll see benefits coming on sooner. I think it's what, 30%, 40% on its way. You won't see as big a drag because of the way we're doing it. You're going to see benefits starting to roll in at the same time the costs are continuing to run.
The same thing for us moving from 28 data centers to two. The fact we're moving from 12 to 13,000 servers down to about 2,500 and so on, bringing them into secure locations. As I said to other groups, as part of this whole, it's not only SAP, it's the whole modernization of our back office. Had Hurricane Sandy hit New York a year earlier, I would have had to tell all of you that we cannot issue our third quarter Q. We'll let you know soon. Just need a few generators, got to get some water out of the buildings, and get some people back to work. Give us a couple of days or maybe a week, we'll get back to you, we'll get that Q out. It would have been devastating for this company.
Had we not completed the work in Japan three weeks before the tsunami hit, we would have not been able to operate with almost 12,000 people in Japan because the systems wouldn't have been able to have been run. All of that has been hardened. Huge investments have come through. You see that in the holding company numbers. All of that is now giving us benefit and that cost is starting to come down. I think not only SAP, but the whole billion-dollar savings is clearly coming through, and I think we're in good shape to achieve that goal. By the way, one of you asked me a question, I didn't Maybe the person's not here now, but was asking me about why would you pay a dividend when a stock is trading at this percentage of book? I appreciate the question.
Because I want to. Look, people, and this is something that may be revolutionary to some of you. When you have more sellers of a stock than buyers, stocks generally go down. Did I go too fast for all of you? I'm just rolling my cart, make sure. Would you like to write that note down? I feel that when you look at who can own AIG, you want to have the broadest universe because as people have built positions, especially starting out, you remember 29 was the ceiling, and many people thought it was the ceiling, and then the ceiling went, even in the end, it was 3,250 or something like that. People thought that was the ceiling. I kind of won that debate. I said it was a floor.
You've got a lot of people who have owned this stock for a period of time, have a lot of gain in that stock, and they're not looking at what it's going to be over the next period of time. That's the way people think. You've got to make sure when they're coming out of the stock, we've been able to broaden the universe of buyers. We feel pretty confident by putting a dividend on this stock, this is going to dramatically improve the potential for buyers. When there's more buyers of a stock than sellers, that helps stocks go up. Not always, but the converse is really bad when there's a lot more sellers than buyers. I know that part. That's what our philosophy has been. We think a dividend makes sense. It's the next step.
We also believe that we need to do share buybacks, and we want to do that at a pace that is very measured, so that clearly our most important thing is to maintain confidence. 98% of the Fortune 500 are still with us, you got to make sure we keep their confidence because they don't want to go back again. I want to make sure the rating agencies are continuing to feel good about our divestiture of non-core assets, our improvement of our coverage ratio, and the fact that we're very prudent and careful about how we do our capital management.
As long as they're satisfied, we'll continue to move because we think over time, especially with the DTA and our ability to produce profits and use that DTA, we think there's plenty of time and plenty of money down the road to continue to do the capital management we talked about when we started down this journey in May of 2011.
Can you talk about the capital of the competitive landscape of the marketplace compared to 10 years ago, where AIG was once very aggressive on price. In the future, this probably will not be the case. Berkshire Hathaway is coming into the market right now. Is this a good five years ahead for P&C right now, or are these going to be a difficult five years?
You think Berkshire is an insurance company?
I-
Just finding out what they are.
I know they're not an investment company, I've been told.
Okay. I'm not sure. All I can tell you is that they do seem to be a financial institution. Having said that, it's not about capital and it's not about price. It's about people. It's not about individuals. It's about organizations. You've all had teams of people leave many of your firms and so on down the line, I'm going to move the book and everything's going to go on. People move on. The world continues without them. When it comes to AIG, the number one by far, I met with 200 of our most important clients in 2010 to assure them that today would be today, that we'd be here, and we'd be strong again, and we'd be able to do all these things.
They wanted to look me in the eye and say, "Are you confident this place will make it, and you're not going to blow it up and we're going to be left high and dry without insurance?" Clearly what they said to me is that the people of AIG are incredible. They've been there for us. They explain everything to us. They're people we can rely on their competence to do things. That wasn't just one or two executives or four executives. It was really 63,000 people, whether they're in finance, HR, claims, in the underwriting side, the actuarial side, whatever the case may be, it's the people of AIG. That has really been a great culture. One thing that Hank did with his profit centers and getting people to really get out there close to the customer, they were empowered.
They understood what they had to do, and that culture has survived. We're capitalizing on it. Yeah, we're going to have competitors, but when people left before, they thought that everything was going to go and Boston would close. It didn't. Now the next group has decided to follow the previous leaders and do that. They hopefully will do okay. It's not about charging less. It's about how do you solve my problem? Do you have the skills and the people to do that? What I said to others, we lost four executives, but if you think about the top 3,300 people of AIG today, 3,300 people at the very top, the leaders of AIG, and you know we have a very strict performance management system. You guys would hate it.
If I look in this room, I would tell you one out of 10 of you will be at the top of our performance scale, and we pay you for that. The next 20% of you are a grade below that. You'll get paid a little less, and then 50% of you are in the middle. You get paid competitive. Coming out of McLagan and all the other stuff that we look at is how you're going to get paid. There's 20% of you are going to be at the bottom. Like it or not, you're going to be at the bottom. Therefore, that's how we go through the ranking. Of the top 3,300, we have 20% at the bottom because we do it by looking at segments of the population.
Of the top 1,100 people, that's our ones and twos, 30% of that universe, we lost 70 people last year. 70 out of 1,100. Of the people that we have in that whole 3,300 universe, 45% of us have been with this company for 10 years, 15% for 20 years. That's what it's all about in the next three to five years. It's taking that group of people, continuing to motivate them, continuing to reward them by giving them something they've never had before. They have great intuition. They have great creativity, great innovation. What they've never had is analytics and data to make judgments. We're now building this entire scientific team under Peter.
Already, we're seeing huge benefits coming out of the data and the data mining that we're doing and giving them better data tools to match their intuition and that's really what's helping drive the loss ratios right now. That's our confidence for the future. Yeah, look, competition's great. If it's just price, that would be great because we can get our price because we have the people. Think about it. AIG is going under. Think about what happened in March of 2009. You're the risk manager of one of the Fortune 100 companies. You know the names of those companies.
You're watching that hearing in Washington about the bonuses, and you're saying to yourself, "My God, I've got $100 million, $150 million of insurance premium that I'm paying to AIG, and I'm going to stay with them at that period of time." They did because they needed the people and support. That's the franchise that's still intact, and that's what we're leveraging going forward.
Well, Bob, I want to keep you on time for your next thing.
Oh, okay. Thank you.
I will end the Q&A here. I really do appreciate you coming out for us and if you take care and thank you.
Thank you all very much.