Ex-CEO Greenberg Protests AIG Sale of Asian Life 'Crown Jewel'

By Lilla Zuil
January 23, 2009

Former AIG Chief Executive Maurice "Hank" Greenberg said in a letter Thursday the insurer should halt asset sales until the new administration in Washington can assess what is best for the now government-controlled insurer.

Greenberg, a vocal critic of successive AIG management, said he was particularly aggrieved that Chief Executive Edward Liddy was moving forward on plans to sell a stake in an Asian life insurance operation, calling it the firm's "crown jewel."

"I would urge you ... to put on hold any sale of assets until the appropriate people in the new Administration can determine what is best for the U.S. taxpayer," Greenberg said in the letter addressed to Liddy.

American International Group Inc, once the world's largest insurer by market value, is selling off multiple businesses to repay part of a federal bailout that has swelled to around $150 billion. AIG was rescued with taxpayer funds after bad mortgage bets left it deeply in the red and on the brink of bankruptcy.

In exchange, AIG gave an 80 percent stake to a government trust, heavily diluting shareholders' stakes.

Greenberg, 83, is AIG's largest shareholder after the government. He and companies that he manages held a roughly 11 percent stake before the September bailout.

In the letter, Greenberg derided AIG's plans to sell a stake in American International Assurance Co Ltd (AIA), its flagship Asian life insurance business. "To dispose of AIA in whole or part could seriously damage the future potential of AIG," Greenberg wrote to Liddy.

Greenberg, who built AIG into a massive insurer spanning 120 countries during a 38-year tenure, has railed against AIG's plan to sell off assets since last year, saying that is not the best way to fix its financial problems.

He said AIA should remain wholly owned because of its unique position in Asia. "AIA is one of the crown jewels of AIG and the only foreign life insurance company in China that is wholly owned and as such, does not require a local partner," said Greenberg.

He added that taxpayers had a better chance of "repaying the debt to the U.S. government and rebuilding AIG so that it becomes a taxpayer on its own as well as an employer of a vast number of people" if the company is kept whole.

"AIG's plan to sell assets and repay the government is making steady progress," said AIG spokeswoman Christina Pretto. She noted that the company had already been able to adjust the terms and conditions of its agreement with federal authorities in November, and that there was an ongoing dialogue with the Federal Reserve Bank of New York, which extended AIG its loan. "We continue to collaborate with FRBNY as market conditions change," she said.

AIG has sold off a handful of its smaller units in recent weeks, including HSB Group to Munich Re for $742 million.

Greenberg told Reuters on Wednesday that he has been in discussion with sovereign wealth funds that may be willing to invest in AIG if the U.S. government agrees to scale back its ownership stake, something that other large investors have also signaled a willingness to pursue.

Greenberg left AIG in 2005 as then New York Attorney General Eliot Spitzer filed a lawsuit against him and the company, alleging manipulation of financial results.

AIG paid $1.6 billion to settle the charges in 2006, while Greenberg has denied any wrongdoing and continues to fight the civil charges.

(Editing by Phil Berlowitz)