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AIG's Greenberg Steps Down Amid Regulatory Inquiries and Management Changes

Strategic Insights

— 2 min read

Maurice "Hank" Greenberg, the longest-serving CEO in American International Group (AIG) history, has stepped down as chief executive officer amid widening investigations into the company's business practices. Greenberg, who will turn 80 in May, will remain as nonexecutive chairman and help AIG with its transition of management. He was succeeded as CEO by Martin J. Sullivan, who vowed to keep AIG's growth rates on course and resolve any regulatory issues.

AIG's board held an all-day meeting on Sunday, March 13, and met again the night of March 14 to work out the management changes. The board had been under pressure from the independent members to replace Greenberg, which mounted over the past week as New York state Attorney General Eliot Spitzer's investigations focused on specific AIG transactions. Greenberg was only the second chief executive AIG had since its predecessor's founding by Cornelius Vander Starr in Shanghai, China, in 1919.

Key Takeaways:

  • Maurice "Hank" Greenberg, the longest-serving CEO in AIG's history, has stepped down amid regulatory inquiries and management changes.
  • Greenberg will remain as nonexecutive chairman and help AIG with its transition of management.
  • Martin J. Sullivan, 50, has been elected as the new CEO and president of AIG, succeeding Greenberg.
  • Sullivan vowed to keep AIG's growth rates on course and resolve any regulatory issues.
  • AIG's board held an all-day meeting on Sunday, March 13, and met again the night of March 14 to work out the management changes.
  • The board had been under pressure from the independent members to replace Greenberg, which mounted over the past week as New York state Attorney General Eliot Spitzer's investigations focused on specific AIG transactions.
  • Larry Radke and Jean-Baptist Pateossian, two executives involved in the Marsh probe, pleaded guilty to scheming to defraud charges.
  • AIG received subpoenas or requests for information related to investigations from the SEC and Spitzer, including inquiries on finite reinsurance agreements and certain assumed reinsurance transactions.

Statistics:

  • AIG's stock was trading at $63.33 a share on the morning of March 15, down 0.81% from the previous close.
  • 85% of AIG's business operations came under scrutiny by Spitzer and the SEC.
  • 53 million was the after-tax charge AIG took in the fourth quarter of 2004 in connection with a settlement with the SEC, the U.S. Department of Justice, and federal prosecutors in Indiana.
  • 126 million was the settlement amount reached in late November with the SEC, the U.S. Department of Justice, and federal prosecutors in Indiana.
  • 80 million was the penalty paid to the Justice Department as part of the settlement.

Sources:

  • A. M. Best via COMTEX
  • The New York Times
  • Reuters
  • AIG's Form 10-K annual report
  • Eliot Spitzer's office
  • The U.S. Securities and Exchange Commission
  • COMTEX News (http://www.comtexnews.com)

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