Greenberg: Story Line Shifts to His Private Company, C.V. Starr

By | November 10, 2009

When Maurice “Hank” Greenberg has been in the news during the past five years, the story usually has been about American International Group (AIG), the company he built into an insurance conglomerate and headed until his ouster in 2005.

Now, he wants the story to be about the private insurance companies he’s expanding around the world.

Greenberg had been fighting with AIG over ownership of stock and has criticized the executives who followed him for taking so many risks that the company required a $182.5 billion federal bailout a year ago.

In a wide-ranging interview with the Associated Press, Greenberg, who at 84 still plays tennis and skis, discussed his plans for building C.V. Starr & Co. and Starr International Co. He also talked about the U.S. economy and the role of government in corporate America. But he declined to answer questions about AIG or a recent New York Times report that he was hiring away executives from AIG.

Here are excerpts from the interview.

Q: What are you buying? How are you looking to expand C.V. Starr and Starr International?

A: First of all, you can’t compare AIG and C.V. Starr, Starr International. They are two different companies. Different size. Different structure. Totally different. One is private, and the other is public, or government-owned I should say.

C.V. Starr & Co. has been in existence, as the original company, for 90 years. It was founded in Shanghai in 1919. C.V. Starr in the United States goes back to about 1950-51. We’ve always been in the insurance business, in the form of a series of general agencies that specialize in different types of businesses, marine, energy, aviation, etc. We’ve added somewhat to those as we find market opportunities and the need for specialized underwriting. And the international side … we operate in Europe, in London, Asia through Hong Kong and some business opportunities in China.

Q: Is there a particular field or industry that would bring more growth to your companies?

A: No. We understand the general insurance business, the commercial general insurance business and we’re expanding in very similar lines. It could be crisis management, it could be political risk, it could be construction. The total range of commercial insurance. We do not underwrite personal lines at this moment. We may one day, but we’re not now.

Q: Is there any interest getting into health insurance?

A: Yes, we are in health insurance in a very focused way. Not in a full-range of typical health insurance policies but we do write excess in some states as a substitute for worker’s (compensation). A company will provide benefits and many times we will underwrite excess of those. (Excess insurance covers the damages or loss that is greater than the amount specified in a separate policy.)

Q: Do you have any thoughts on the proposed health care legislation?

A: Well, I have trouble understanding how you can add 40 million people and have reduced costs. The math doesn’t add up to me. Either you are going to cut benefits or restrict benefits or limit benefits. It’s very hard to add exposure and have less cost.

Q: Are you planning to take C.V. Starr or Starr International public?

A: No. I like running a private company. The environment we are in today, I do not want to be a public company.

Q: How do you assess the state of the economy? And the insurance business?

A: The insurance business is very competitive in the U.S. right now. Rates are under pressure and have been. Balance sheets have improved somewhat because the market conditions. (The government just reported) a 3.5 percent increase in GDP in the third quarter. But a lot of that, in my judgment, is a benefit from the stimulus packages that have been injected into the economy, including the clunker program, the benefit for families to buy a home. All that stimulus has had an impact, obviously, on GDP.

I think it depends on what’s going to happen in the next couple of few quarters when stimulus runs out. How are we going to see as much growth then? We have high unemployment and that’s not going to decline very quickly. We have a huge, huge deficit that’s going to have to be paid for, sooner or later. There’s a lot of capital sitting on the sidelines, waiting to see how things clarify.

It’s too soon to declare victory, given all the things I mentioned outstanding.

Q: With all your travels and work overseas, how much do the Asian markets pay attention to what’s happening in the U.S?

A: The U.S. is still the largest economy in the world. We are a big market for imports, but imports are way down in the United States. The weak dollar has made imports more expensive. The flip side, savings in the U.S. is up about 50 percent, which is an enormous change from what we had before when we had negative savings. And while savings are great, if you want to grow the economy, you got to get people to spend money. It’s wonderful to have savings, but it’s not what we need right now.

Q: What do you think of the government’s tight grip on companies?

A: It’s terrible. I do not believe the government should be involved. We have a political system. We have the right to succeed and fail without government interference. How often have we had a balance budget in our country? Not very often.

So, governments have difficult running governments. They hardly have the ability to run companies. I do not think it’s a great idea, for example, to set a salary limit of a couple of hundred-thousand dollars for a top executive. What do you think is going to happen? That executive will go elsewhere where he’s appreciated and where the company can pay him what he’s worth. It’s not a very clever strategy.

Q: Do you think companies will fail because of that?

A: What will happen is companies will lose the key people and they will struggle along until something else comes along. It’s very difficult to succeed when you don’t have the best people running a company.

Q: Do you think it’s OK then that the government allows companies to fail? Or is there a company that is too big to fail?

A: This whole theory of too big to fail should be tested and examined. I don’t think we’ve had a dialogue on that subject. It seems to me that they are very selective on who you permit to survive and who you permit to fail. And if the cost of survival is so huge, I don’t see what you gain from it. We have a Chapter 11 (bankruptcy), which permits a company to declare Chapter 11, and be reorganized and go back into business again. That to me seems what we’ve lived with for many years and I don’t see why it’s not something that has been used more.

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