AIG still solid despite loss of legendary chief, analysts say
By DANIEL Hays
and Michael ha
The dramatic replacement last week of Maurice Greenberg, American International Groups legendary chief executive, will not sink the corporate ship, analysts and rating firms appear to agree.
Several opined that the company he guided over 37 years to become the countrys largest insurer is so solidwith net income exceeding $11 billionthat it can survive well without him.
In a decision announced last Monday night after extended meetings by the board of directors, Greenberg was given the post of non-executive chairman, while his presidency and CEO spot was handed over to Martin J. Sullivan, 50, the companys co-chief operating officer.
During Greenbergs tenure, the company routinely had shrugged off regulators concerns about its operations, but in the past few months AIG has been tattooed with subpoenas as investigators probe transactions suspected of providing a false picture of the finances of AIG and other companies.
Over the years, Greenberg, now 79, developed a reputation as a tough and daring innovator, but in the current era of heightened corporate scrutiny, questionable moves with finite insurance products and his combative attitude with investigators might have combined to prompt his downfall, industry observers contend.
Just two days before New York Attorney General Eliot Spitzer announced that his investigation of broker fees had found widespread corruption in the insurance industryleading to a bombshell price-fixing lawsuit against Marsh and McLennan Companies that implicated AIG officialsGreenberg during a public appearance took a not-so-veiled swipe at Spitzer.
Asked about the attorney generals probe of incentive fees insurers paid to brokers to secure business, he said: “We need to continue operating in an environment of financial creativity or more and more businesses will go overseas. There is a clear need to differentiate between a parking violation and a murder charge. This is where our industry can enlighten political figures who seek to advance to higher office.” (Spitzer had announced he was running to become governor of New York.)
Since those remarks to a brokers group on Oct. 12, 2004, AIG and Greenberg have been served with subpoenas by Spitzers office and four AIG employees have pled guilty to charges related to price-fixing with commercial insurance brokers brought by Spitzers office.
Subpoenas, some of which the company has acknowledged, also have arrived from the Securities and Exchange Commission and the U.S. Justice Department related to past deals involving reinsurance and non-traditional insurance transactions suspected of serving to manipulate improperly the earnings picture of AIG and other companies.
AIG, in its announcement of the management shift, said its ongoing internal review of that activity, which began after “previously announced regulatory inquiries,” would delay the filing of its annual report, which had been due last week.
In addition to the replacement of Greenberg, the company moved co-COO Donald P. Kanak, 52, to executive vice chairman and COO.
The firm also promoted Steven J. Bensinger, 50, to the chief financial officer posta vacancy that was created when the board, without explanation, removed Howard Smith, 60, from the post and placed him on leave. It was revealed later that Christian M. Milton, a vice president for reinsurance, also was placed on leave with no announced reason.