AIG to replace CEO Liddy, revamp board; New chief will need varied skill set to confront company’s many challenges: Analysts

JUDY GREENWALD



American International Group Inc. faces yet another challenge as it seeks someone to succeed Edward M. Liddy as chief executive officer of the embattled company.

Finding the ideal candidate for that job may not be easy, analysts say. The new chief will have to work to keep the company stable while leading it through its dismantling, all the while facing ongoing public and government scrutiny.

AIG last week announced that Mr. Liddy, CEO and chairman, would step down as soon as his replacement is found. In addition, AIG said it would separate the CEO and chairman roles and would reconfigure its board so a majority of its members will be the six newly elected independent directors announced last week (see box, page 20). The search will be conducted by the new board and the federally appointed trustees of the AIG Credit Facility Trust.

``Working with the board, Mr. Liddy has determined that, coincident with the reconfiguration of the board, the company should also initiate the necessary actions to install a more permanent team and structure,'' AIG said in a statement.

Mr. Liddy, a former CEO of Allstate Corp., came out of retirement to join AIG in September 2008 at a salary of $1 a year.

He was the insurer's fifth chief executive since 1919 and its third in a year. He took the position during the federal bailout in September 2008 by the Federal Reserve Board, replacing Robert B. Willumstad. Mr. Willumstad had been installed as CEO in June 2008 after the ouster of former chief Martin J. Sullivan. Mr. Sullivan replaced longtime chairman and CEO Maurice R. Greenberg in 2005. AIG's only other chief has been company founder Cornelius Vander Starr.


Mr. Liddy said in a statement, ``Much work remains to be done at AIG, but much has already been accomplished. With the financial assistance of the Federal Reserve Bank of New York and the U.S. Department of the Treasury, we have made substantial progress in stabilizing AIG, reducing the systemic risk that led the government to rescue the company, protecting our policyholders and our businesses, and developing a plan to repay American taxpayers.''

Now, after being given access to more than $180 billion in federal aid, AIG has sold some assets and is looking to sell more.

In April, it announced plans to accelerate the spinoff of its property/casualty lines into a special-purpose vehicle, in preparation for the possible sale of a minority stake in the business.

AIG also continues to pursue the sale or spinoff of various other operations, including its foreign and domestic life insurance and aircraft leasing businesses, in an effort to repay federal assistance.

Observers say Mr. Liddy's departure is not a surprise.

``He came in as an interim person,'' said Cliff Gallant, an analyst at Keefe, Bruyette & Woods Inc. in New York. ``He's a good man and he clearly stepped into what he knew to be a very difficult situation, and I think he held handled it with about as much grace as you could have expected,'' said Mr. Gallant.

The timing of Mr. Liddy's departure is better than it would have been a few months ago, when the company was in a ``day-to-day crisis mode,'' said Jennifer Marshall, a senior financial analyst with Oldwick, N.J.-based A.M. Best Co. Inc.

Still, Mr. Liddy's departure leaves the company with another challenge.

``The most important thing for the company is stability, and I think the sooner you get a permanent person who can lay out a vision for the company, the better,'' Mr. Gallant said.

And finding a replacement as CEO may be difficult, given AIG's situation, analysts say.

``You're going to need somebody who's had a unique set of experiences,'' said John Wicher of John Wicher & Associates in San Francisco. AIG ``is going to need somebody who is forward-looking and inspiring and can re-energize the employees, the broker community and others that the AIG which they knew and loved is going to be reinvigorated,'' said Mr. Wicher.



``The flip side is, because of the public ownership, you're going to need someone who can navigate the very difficult politics of all of this,'' as well as someone capable of unwinding nonstrategic assets and AIG's large derivatives positions.

``Then you ask yourself, who in the world would want that job?'' said Mr. Wicher.

Bill Bergman, an analyst with Morningstar Inc. in Chicago, said, ``They're going to be looking for someone with good expertise and experience in restructuring, including the legal aspects of restructuring a large enterprise,'' as part of the skill set of the new CEO.

Some names already have surfaced as possible candidates. Mr. Gallant said he has heard AIG's vice chairman and chief restructuring officer Paula Rosput Reynolds is a candidate. ``That makes sense. She has an insurance background'' and has led other industries as well, said Mr. Gallant.

Mr. Gallant said if the property/casualty operations are to remain an ongoing concern, ``clearly, someone with an insurance background would make sense.''

The candidate need not necessarily come from the insurance industry, but could be someone from financial services who brings a ``fresh look'' to the company, said Mr. Wicher.


In addition, given the political pressure on AIG, ``they're going to want somebody who's going to be user friendly in Washington, D.C.,'' said Richard V. Smith, senior vp at Sibson Consulting, a wholly owned subsidiary of Segal Co. in New York.

Particularly for the chairman post, ``Clearly, it's going to be somebody with a lot of experience, who I think understands how Washington works, because I think the chairman is going to have to spend a lot of time with the U.S. government'' as AIG's shareholder, said Mr. Gallant.

John Challenger, CEO of Challenger, Gray & Christmas Inc., an executive recruiting firm in Chicago, said AIG might decide to select a chairman who will act as the company's ``public face,'' while hiring an insurance expert as CEO who will ``be kept out of the public eye, if you could do that.''

However, Mr. Smith said, ``I believe they probably already have their chairman, just haven't announced it,'' and it is either one of the newly appointed board members or an existing board member. ``I don't think there'll be a dual search here,'' he said.

An AIG spokeswoman had no comment.