AIG’s New CEO Says His Task Will Be Daunting
The new chief executive of American International Group Inc.’s said Tuesday that he faced a “daunting task” in replacing Maurice “Hank” Greenberg. Martin Sullivan’s comments came as shares of the world’s largest insurer fell for a third straight day and Fitch Ratings cut its credit rating.
Sullivan, 50, said he would work to resolve probes by New York Atty. Gen. Eliot Spitzer and regulators who are examining whether AIG manipulated its earnings. Greenberg, AIG’s leader since 1967, stepped down Monday after investigators learned he may have initiated a reinsurance transaction to boost reserves for claims, people familiar with the matter said.
“We cannot ignore the issues that we have,” Sullivan said during a conference call with analysts and investors. “Our success will be measured in a large part on how well we address these issues.”
Sullivan is seeking to repair investor confidence after the stock of New York-based AIG fell 15% in the last month, cutting about $29 billion from its market value. On Tuesday, shares of American International dropped $1.93, or 3%, to $61.92 on the New York Stock Exchange.
Fitch on Tuesday lowered AIG’s long-term debt rating to AA-plus, and Standard & Poor’s and A.M. Best Co. said they were considering similar actions. Moody’s Investors Service said its outlook on both ratings was now negative.
Sullivan’s approach may contrast with Greenberg’s criticisms of regulators, whose investigations include potentially inflated earnings statements and possible rigged insurance bids.
As recently as Feb. 9, Greenberg, 79, said on a conference call that regulators were “turning foot-faults into murder charges.” He told investors during Tuesday’s call that Sullivan’s appointment was “terrific.”
Greenberg, who remains chairman, is slated to testify Thursday before Spitzer and the Securities and Exchange Commission, said one person who declined to be identified.
Sullivan, who skipped college to join New York-based AIG’s office in Britain in 1971 as a teenager, was most recently co-chief operating officer.
“His style will be very different,” said Eli Broad, 71, who served on AIG’s board between 1999 and 2003. “Greenberg was great at what he did, but sometimes he was abrupt and some people didn’t enjoy working with him. Martin can be tough, but his personality is friendlier than Greenberg’s.”
AIG said Feb. 14 that it received subpoenas from Spitzer and the SEC and later disclosed that one was directed to Greenberg. The subpoenas sought information on non-traditional policies as well as AIG’s own accounting on reinsurance it sold to other insurers.
The regulators are probing a transaction with Berkshire Hathaway Inc.’s General Reinsurance in 2000, sources said. The SEC has not concluded that Greenberg’s role in the transaction was improper and the agency is continuing to investigate, one person said.
“The regulatory scrutiny into AIG’s business practices under his watch is a seemingly endless black hole that keeps pressuring the company and the stock,” said Michael Paisan, an analyst at Legg Mason Wood Walker, in a research report.
