Tags: AIG | Names | Sullivan | Replace | CEO | Greenberg

AIG Names Sullivan to Replace CEO Greenberg

Tuesday, 15 March 2005 12:00 AM

An uncharacteristically subdued Greenberg participated Tuesday in a conference call with analysts, saying nothing about himself but heaping praise on the new management team.

He said of Sullivan, "I think it's just terrific that he's the new CEO of the company." And he hailed the new chief financial officer, Steven J. Bensinger, as "a very experienced executive and just a pleasure to work with."

Greenberg had led the company with an iron hand after replacing founder C.V. Starr, who died in 1968. A graduate of New York Law School, Greenberg has been with the company since 1960.

While Greenberg was the grand master of the property and casualty insurance industry, his autocratic management style rubbed many the wrong way, including two of his sons. Jeffrey Greenberg, 53, and Evan G. Greenberg, 50, both spent part of their careers at AIG, only to leave for other insurance opportunities when their father's unwillingness to share - or consider ceding - power became apparent.

AIG's management shakeup came amid a widening investigation into the company by New York Attorney General Eliot Spitzer, federal prosecutors and the Securities and Exchange Commission. The regulators are looking into the use of so-called finite insurance, or financial reinsurance, which they contend can be used to manipulate earnings.

One of the transactions being probed took place between AIG and Berkshire Hathaway Inc.'s General Reinsurance unit four years ago and apparently was intended to shore up AIG's reserves. Reports have said Greenberg was personally involved.

An earlier Spitzer probe into bid rigging and price fixing resulted in the resignation of Jeffrey Greenberg last October as chairman and chief executive of the insurance brokerage Marsh & McLennan Companies Inc. Marsh & McLennan reached a settlement in the case Jan. 31, agreeing to pay $850 million in restitution.

Evan Greenberg remains president and chief executive officer of Bermuda-based ACE Ltd.

On Tuesday, Fitch Ratings service lowered AIG's long-term issuer rating and unsecured senior debt obligations to AA-Plus from AAA, citing the "uncertainties and disruptions" of the investigations and management changes. Standard & Poor's Ratings Services, meanwhile, put AIG's AAA long-term counterparty credit rating on its credit watch list "with negative implications."

AIG shares slipped 44 cents to $63.41 in morning trading on the New York Stock Exchange.

In Tuesday's conference call, Sullivan said that "as only the third CEO in AIG's history, I am well aware of the opportunities and responsibilities of leading this great company." He added: "At the same time, we cannot ignore the issues we have - and the industry has - to address."

Sullivan declined to discuss specifics of the regulatory investigations but said, "I would like to get these behind us as soon as possible."

Asked about Greenberg's continuing role as chairman, Sullivan said that "his guidance to me will continue to be invaluable going forward."

Sullivan, who is British, joined AIG as a teenager in 1971 in London. He held a number of management positions before assuming the posts of co-chief operating officer and vice chairman in May 2002. At that time, he also was named one of seven members of the "office of the chairman" and was added to AIG's board.

In addition to Sullivan and Bensinger, the board promoted Donald P. Kanak, 52, to the post of executive vice chairman and chief operating officer, focusing on Asia. He previously was vice chairman and co-chief operating officer with Sullivan.

Bensinger replaces Howard I. Smith, who has taken leave, AIG said. It gave no further details of Smith's departure.

AIG also said its annual report, which was to be filed on Wednesday, would be delayed because of the management shakeup and internal accounting review. Bensinger said that the company aimed to produce the report within two weeks and that it did not expect significant changes in the company's financial position.

With a market capitalization of $168.5 billion, AIG is one of the largest insurance companies in the world. And Maurice Greenberg is one of the company's largest individual shareholders.

According to recent filings with the Securities and Exchange Commission, Greenberg directly controls more than 43.3 million AIG shares and indirectly controls an additional 23.7 million. The company had 2.64 billion shares outstanding in 2004.

The probe of finite insurance is the latest in a series of regulatory woes for AIG.

Earlier, AIG was mentioned in the case Spitzer brought against Marsh & McLennan, but was not formally charged. But four former AIG executives have entered guilty pleas to criminal charges stemming from the investigation.

Last November, AIG agreed to pay $126 million to settle allegations of securities fraud by the SEC and the Justice Department related to three 2001 transactions it made with PNC Financial Services Group Inc. that allegedly helped the Pittsburgh-based banking company artificially inflate its earnings.

Part of the settlement also went to resolve a similar case involving Brightpoint Inc., a Plainfield, Ind., cell phone distributor.

Under that settlement, an independent monitor is examining AIG's books to see if there are any other questionable deals.


© 2019 Newsmax. All rights reserved.

1Like our page
An uncharacteristically subdued Greenberg participated Tuesday in a conference call with analysts, saying nothing about himself but heaping praise on the new management team. He said of Sullivan, "I think it's just terrific that he's the new CEO of the company." And he...
Tuesday, 15 March 2005 12:00 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
© Newsmax Media, Inc.
All Rights Reserved