American International Group, Inc. (AIG)

[TRUISM]

AIG’s Benmosche — the man, the mouth — bails
Opinion: The CEO helped save the biggest U.S. insurer, even if he got in the way
June 13, 2014, 2:12 p.m. EDT

By David Weidner, MarketWatch



Robert Benmosche, chief executive officer of American International Group



SAN FRANCISCO (MarketWatch) — Let’s make this clear from the start. Robert Benmosche is not primarily responsible for saving American International Group Inc., the troubled insurer and financial-services company he was brought in to lead in the summer of 2009.

Willingly or not, U.S. taxpayers were.

So, as AIG AIG +0.20% announced this week that Benmosche will step down Sept. 1 and hand the reins of the insurer to Peter D. Hancock — a move that came sooner than expected — it’s time to look back on the Benmosche era at AIG, the biggest and, arguably, the most controversial of the financial-crisis bailouts.

In 2008, AIG received a $182 billion commitment from the Treasury Department and the Federal Reserve. Ultimately, it tapped $67.8 billion. That’s what saved AIG. And if you’re an investor, it was the government’s support that helped keep the stock afloat in the early days of Benmosche’s tenure as chief executive.

But even with government support, being the chief executive of AIG was hardly a matter of minding the store. As the Latin scholar Publilius Syrus wrote, “Anyone can hold the helm when the sea is calm.”

For AIG under Benmosche, the sea was anything but calm. Benmosche had serious flaws as CEO, but few could argue that he wasn’t effective in his primary task. The AIG ship has emerged from a perfect storm of its own making.

AIG not only repaid the government (which made an additional $5 billion on warrants it got as part of the bailout), but earned a $9 billion profit last year and paid taxes for the first time since its bailout. (AIG would have reported a smaller profit in 2012 and no profit the year before that had it not been for $20 billion in income-tax credits.)

This is no small feat. It’s sometimes hard to remember that AIG was once considered a lost cause. Some predicted it would be acquired or sold off for parts . And why not? It reported the biggest single-quarter loss in U.S. history, $61.7 billion, in 2009. And that came after repeated losses of tens of billions in preceding quarters.

Today, it’s half the size in terms of assets and revenue. But AIG’s most recent year of profit was close to two-thirds of its 2006 profit ($14 billion) and more than the company produced in 2007 ($6.2 billion). The stock is up more than 340% since its nadir in the summer 2009.

That’s impressive given that AIG ground through a series of sales, divestitures and spinoffs to raise money. Moreover, Benmosche was selling international divisions and insurance portfolios in a buyer’s market with an added twist: There weren’t any buyers.

Yet AIG, under Benmosche, was able to sell assets, notably, its Asian unit, AIA Group Ltd., in 2012. That deal netted more than $35 billion — a little more than Prudential PLC, a U.K.-based insurer, agreed to pay in 2010 before cutting its offer to $30.4 billion. Benmosche was second-guessed for allowing the Prudential acquisition to fall through.

Benmosche’s moves were, as Paul Newsome, an analyst at Sandler O’Neill & Partners, said, “very important and quite critical to the recovery.”

The problem for Benmosche was that AIG’s turnaround was often overshadowed by his blunt talk. The former CEO of MetLife MET -0.46% immediately doused gasoline on a public that was furious with the AIG’s cavalier, and ultimately costly, approach to risk. He defended post-bailout bonuses to employees, called Washington lawmakers opposed to them “crazies” and said then-New York State Attorney General Andrew Cuomo “doesn’t deserve to be in government.”


TRUTH