New AIG chief says 'nothing off table'
Robert Willumstad, American International Group Inc's new chief executive officer, says "nothing is off the table" as he tries to win back shareholders' confidence in the world's biggest insurer.
Willumstad, who replaced Martin Sullivan as CEO after record losses tied to subprime loans, said he plans to review all of AIG's operations, which include offices in more than 100 countries and more than $45 billion of hard-to-value assets. AIG gained 0.5 percent to $34.01 in early trading at 9:07 am in New York.
"I've set a goal in the next 90 days to dig into the businesses, all of the businesses, not just the non-insurance businesses, to make sure our capital is being employed in the right areas," Willumstad, 62, said in an interview. "If there are businesses that are hampered in terms of their growth, or strategically we're not as competitive in some areas, we'll take a hard look."
Willumstad will need to assure regulators, investors and AIG's 116,000 employees that he has a firm grip on the company. Sullivan, 53, was ousted over the weekend after New York-based AIG lost 41 percent of market value this year following record losses of $13 billion during the past two quarters.
The performance has been "unacceptable", said Willumstad, who has served as AIG's chairman since 2006 and promised to have a turnaround plan in place by September.
Willumstad said he'll meet with AIG's unit heads, business partners and regulators to get a better feel for the company, which has $1 trillion of assets. He worked almost 40 years in banking before joining AIG. He was part of Sanford Weill's team that created Citigroup Inc, the biggest US bank by assets, from the 1998 merger of insurer Travelers Group and Citicorp. Jamie Dimon, who also worked with Weill, now runs JPMorgan Chase & Co, the third-largest US bank.
Willumstad left Citigroup in July 2005, saying he wanted to be CEO of a public company.
While Willumstad says he isn't an "insurance guy", his responsibilities as chief operating officer of New York-based Citigroup included supervising the Travelers insurance unit.
In addition to selling life insurance and protecting property, AIG owns or manages about $25 billion of real estate, including residential, industrial and retail properties. The company had private equity and hedge fund holdings of $29.4 billion as of March 31 and owns International Lease Finance Corp., the largest lessor of planes to airlines.
Record loss
AIG may have "gotten to the point that it has a size issue", said Keith Wirtz, president of Fifth Third Asset Management in Cincinnati, which manages $23 billion including AIG shares.
"Have you gotten so big, you can't replicate the growth rates you've had in the past?"
Willumstad disagreed, saying most of the setbacks have been "isolated" to the US real estate market.
"This is a big company, but it's got its core competencies in the insurance business, and generally speaking, the insurance business is doing quite well," Willumstad said.
The insurer posted a record $7.81 billion first-quarter loss after writing down the value of swaps and mortgage-backed securities.
AIG's financial-products business guaranteed more than $460 billion of assets for fixed-income investors on March 31, including $60.6 billion in securities tied to subprime loans.
Second-quarter results didn't have "any material impact on the decision" to change CEOs, Willumstad said. He wouldn't elaborate on how the quarter was shaping up.
"AIG needs to go through some sort of process to prove to the market that it completely understands the credit risk that it faces," said David Havens, a credit analyst at UBS AG in Stamford, Connecticut.
"Some sort of internal and perhaps external study might be necessary here."
AIG faces challenges beyond any executive's control, including greater-than-average US catastrophes this year. More than 1,000 tornadoes were reported in the US from April 1 to June 13, up 71 percent from the second quarter of 2007, according to the National Weather Service.
Agencies
(China Daily 06/17/2008 page17)
