Investors Wait to See If AIG CEO Benmosche Must Step Aside

By | October 27, 2010

American International Group Inc. may need a successor for Chief Executive Robert Benmosche sooner than it expected, but experts say it is not clear who that would be or how long they would be in charge.

AIG said Monday that Benmosche has cancer and will start aggressive chemotherapy. While he intends to work full-time and stay with AIG until his planned 2012 retirement, oncologists say the debilitating effects of chemo and the time needed to pursue a course of treatment may make working difficult.

Early speculation on who might step in for Benmosche centers on candidates, including Jay Wintrob, who runs AIG’s domestic life and retirement unit; Peter Hancock, who oversees AIG’s risk controls; and board chairman Steve Miller, one of the country’s top restructuring experts.

But at the same time there is concern in some quarters that AIG may not have as deep an executive team as a company might like in a situation like this.

“While we view Chairman Robert Miller as a stabilizing force, we are concerned that the turmoil at AIG over the last several years has depleted the ranks of middle and upper managers who could fill this void,” S&P insurance equity analyst Cathy Seifert said in a research note.

Investors seem unconcerned at first glance about Benmosche’s status, with AIG shares rising 2.3 percent to close at $42.03 Tuesday to lead the S&P insurance index.

VACANCY RISK

But experts said there is a real risk for investors that Benmosche will need to step aside in the near term.

“It’s going to be difficult in the CEO job to focus your attention on your health and the company,” said Alexa Perryman, an assistant professor at Texas Christian University who studies corporate governance issues.

She said AIG was to be applauded for making the initial disclosure, which she called a first step.

“They announced it, which is fantastic, but they didn’t say here’s our plan to take care of it,” she said. “What they missed is giving shareholders some security as far as what the plan is going forward.”

AIG has had four CEOs since June 2008, as the insurer racked up big losses and collateral calls from derivatives positions, took bailout money and restructured its business.

Benmosche, 66, became AIG’s CEO in August 2009 and the company has since made good progress. It still owes the U.S. government around $100 billion.

But AIG has moved closer to paying back that debt by selling foreign life unit ALICO to MetLife Incand selling about $18 billion of shares in its Asian life unit, AIA.

Rounding off those deals and moving forward with the company’s restructuring could be hard for Benmosche if his treatment affects him in the way it typically does other cancer patients, doctors said.

“Chemotherapy and cancer itself can be profoundly fatiguing,” said Gina Villani, chief of the oncology division at Brooklyn Hospital Center in New York.

But not every patient is debilitated by the treatment.

“I have patients who work full time and extra full time,” said Charles Loprinzi, an oncologist at the Mayo Clinic in Minnesota. “It varies from person to person and job to job.”

(Additional reporting by Elinor Comlay; editing by Andre Grenon)

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