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It isn’t always about merit

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No good deed goes unpunished.

That is the key takeaway from the departure last month of Jay S. Wintrob as president and CEO of American International Group’s Life & Retirement unit. It is pure coincidence that Wintrob’s departure was announced against the background of the start of the Federal Claims Court trial demanded by Maurice “Hank” Greenberg on his contention that the federal government’s methodology in handling the bailout of AIG amounted “to an attempt to ‘steal the business.’” But it is ironic that Wintrob is departing after his unit reported two straight quarters of the highest earnings in the history of AIG’s life business.

He is leaving as the nation relives the nightmare that ensued when the AIG situation came to light in early September 2008. For example, in an email released the day before he testified at the trial Oct. 9, Ben Bernanke, then-Federal Reserve chairman, said, “We think they are days from failure. They think it is a temporary problem. This disconnect is dangerous.”

“It was a failure of the country to put in place a system to constrain risk-taking,” Timothy Geithner, former New York Federal Reserve Board president and Treasury secretary for the Obama administration during the bailout, testified. “Risk migrated to places where constraints did not exist.”

A Government Accountability Office report in 2011 on the AIG rescue noted: “During October 2008, the Federal Reserve System considered options that included…government purchases of AIG’s life insurance subsidiaries.”

David Merkel, a life actuary and former AIG employee, writing in Seeking Alpha, added that, “though AIG Financial products was the main reason for the bailout, AIG’s domestic life subsidiaries were all insolvent, as were their mortgage insurers, and perhaps a few other smaller subsidiaries as well. This was no small mess, and Greenberg is dreaming if he thought he could put together financing adequate to keep AIG afloat in the midst of the crisis. [Warren] Buffett was asked to bail out AIG, and he wouldn’t touch it.”

It was against this background that Wintrob, who came with SunAmerica when it was acquired by AIG in 1998, rebuilt AIG’s life business as head of its 13 life subsidiaries. According to those in the business, distributors and life product wholesalers were running away, in droves and with good reason, from AIG. However, by 2010 Wintrob had stabilized the unit, and pretax operating income at Wintrob’s unit more than doubled from 2011 to $6.51 billion last year, fueled by investment gains. The business generated $20.6 billion in revenue in 2013, about a third of AIG’s total from insurance operations. Wintrob did this by boosting sales of retirement products such as variable and fixed annuities with guarantee riders as rivals were forced to retreat.

Wintrob will not go away empty-handed. According to a regulatory filing, his severance package will include stock awards, an incentive payment and severance of about $14.5 million. And, there is likely good reason to consolidate the business, which what his departure is all about, because the core P&C business of AIG is no longer able to provide the consistent earnings growth that analysts demand of companies they cover. That’s because climate change, severe competition in AIG’s most profitable units, and an unstable world have combined to make the P&C industry less predictable than before.

However, money isn’t everything. And the fact Wintrob will start a new job this month without the need to be uprooted from his home in Los Angeles doesn’t compensate for the fact he will not be able to see through what he was able to rebuild.

At the same time, it is a sign of our times, and the ruthless, cynical world in which we live.


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