THE PROSPECTIVE STRATEGY TO BE TESTED

A Fortune 500 Strategy

A Fortune 500 insurance company reported in their annual report the following strategy:

Throughout 2018 we executed on our strategy to deliver long-term, profitable growth by improving underwriting capabilities, mitigating risk and volatility by repositioning reinsurance structures and risk limits, adding world-class talent and utilizing capital opportunistically to reinvest in the business.(1)

TEST THE STRATEGY

Opposite?  Fail. The words improving, mitigating, and world-class all fail; none gives information.

Numbers?  Pass.

Duplicate?  Pass, but fail if the board has made this a constraint on the CEO.

Excluded?  While the broadness of the statement would seem to apply to the entire business, without more knowledge of the business it is hard to know if any aspect of the company is excluded.

List?  Fail.

CONCLUSION

This statement is a list of strategic themes, which is not a strategy (See Chapter 4). Most of the items would apply to any insurance company.

The use of themes appears in other places for this company, for instance, a 2015 statement by the CEO: Our strategy focuses on four major objectives: to narrow our focus on businesses where we can grow profitably, drive for efficiency, grow through innovation and optimizing our data assets, and return excess capital.”(2)

These 2015 themes are even less useful because they are not even specific to an insurance company. They could apply to any business on earth. If Wall Street accepts these statements and the CEO buys some time, then they are useful. But if these are the CEO’s actual working objectives and strategies, then they are not.

(1) AIG 2018 Annual report

(2) American International Group Inc (AIG) Posts Weak Q3; Stock Falls After-Hours, retrieved Nov 2, 2015

 

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