American International Group Inc. Chief Executive Officer Peter Hancock said that it’s difficult to quantify the financial risk to the company from former CEO Maurice “Hank” Greenberg’s suit over the insurer’s bailout.
“As I see it, it’s a compound problem,” Hancock said Wednesday in a conference hosted by Deutsche Bank AG.
Greenberg’s Starr International Co. has sued the U.S., contending that the 2008 government rescue of AIG cheated shareholders out of at least $25 billion, and the lawsuit’s verdict is expected in coming weeks.
The first variable is whether U.S. Court of Federal Claims Judge Thomas Wheeler rules in Starr’s favor. Then, Hancock said, it depends on the size of damages and whether the government seeks to recover the funds from AIG. The New York-based insurer has said it would defend itself against the government in such a situation.
AIG CEO
“As we think about those probabilities together, we come up with an assessment of whether this is a cause for concern,” Hancock said. “Whichever way, it’s not going to be resolved for many years. So, it’s not an immediate liquidity event.”
Credit Suisse Group AG estimates that AIG could fall as much as 3.5 percent if Wheeler rules in Greenberg’s favor.
Regulatory Risk
On another topic, Hancock also said that AIG, which was named a potential risk to the financial system by U.S. regulators, prefers to cooperate with watchdogs rather than to resist oversight.
“For the most part, where we encounter government, whether it’s in Japan, the U.K., at the federal level in the U.S. or at the state level, we see an alignment,” Hancock said Wednesday when asked at the conference if there was too much interference from regulators. “The benefits of having a collaborative relationship with all of the government agencies you operate with, in my view, far outweigh scoring points as to whether more or less government is good.”
AIG is one of four companies designated by a Treasury Department-led panel as a non-bank systemically important financial institution, or SIFI, a tag that can lead to tighter capital rules. Rival insurer MetLife Inc. is suing to overturn the designation, and General Electric Co. is selling assets in a plan that could help the company’s finance arm escape the grip of the Federal Reserve’s too-big-to-fail oversight.
AIG has already shrunk its balance sheet, partly through asset sales that helped the New York-based insurer repay a U.S. bailout, said Hancock, who became CEO last year.
“We are in the business of serving our clients and rewarding our shareholders with great returns,” Hancock said. “Getting into an ideological battle of whether more or less government is a good thing doesn’t seem like a winning proposition.”
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