One group of analysts believes Google’s parent company should bet big on financial services and acquire AIG, the nearly century-old insurance company.
The idea would be for Alphabet (GOOGL) to acquire the insurance provider and turn it into an innovation lab for financial services, according to an analyst note obtained by Bloomberg from Citigroup (C) analysts let by Todd Bault. “We realize it is a very low-probability event, while maintaining that it is still a very good idea,” says the note.
In short, the acquisition would amount to marrying AIG’s (AIG) ongoing work to refocus its services and Google’s technology-based approach to redefining traditional industries. In the last decade, AIG has suffered from higher-than-expected claims costs, a string of executive departures, and is now under pressure from activist investors like Carl Icahn and John Paulson to whip itself into shape.
Alphabet, on the other hand, changed its company structure last summer, gaining a new name and organizing it in way that creates an umbrella (Alphabet) over a constellation of business units focused on specific technologies. AIG CEO Peter Hancock has praised Alphabet’s move, even comparing his own company’s structure to it, according to Bloomberg.
Alphabet has also dabbled in selling insurance, although it’s currently only focused on car insurance.
With that said, Citigroup’s analysts acknowledge that Alphabet’s shareholders wouldn’t be too happy for the company to take on billions of dollars in insurance liabilities. So, they believe the solution would be to partner with an investment bank in a deal that would let Alphabet control what it knows best: data and business strategy.
AIG’s market cap is currently just under $68 billion, according to Google.