Analysts: Benmosche Has the Right Experience for AIG Job

Robert H. Benmosche has the right experience and skills to take on the difficult role of leading American International Group Inc. as it seeks to restructure its businesses and restore financial stability, analysts said.

"I believe it's a plus for AIG," said Marc Steinberg, an A.M. Best senior financial analyst. "Benmosche is probably a good match for what the organization needs to move forward. AIG isn't just an insurance player -- AIG is a diversified global financial organization. He's got the business sophistication to manage it."

Benmosche, 65, retired in 2006 as chairman, president and chief executive of MetLife Inc. While at MetLife, he led the company through its transition from a mutual to a public company and several major acquisitions.

He had been with MetLife since 1995. Previously, he had been with Paine Webber, where he directed that company's merger with Kidder Peabody. He had also served with Chase Manhattan Bank.

Steven Schwartz, a Raymond James analyst who covers MetLife, said when he saw the news, "I kind of scratched my chin and said, 'you know, that makes sense.'"

Benmosche had a major impact at MetLife, Schwartz said

"He really changed the culture of that company," Schwartz said. "It was a mutual company with a mutual company type of culture. To turn that around, to one that was more focused on returns on equity and profitability, that was something that he did extraordinarily well."

Analysts said there are similarities to AIG's life business and MetLife's.

"MetLife maintains a significant international life insurance presence," said Steinberg. "AIG, from a life insurance perspective, maintains a similar business profile, with a very strong global and national presence."

MetLife made several major acquisitions while under Benmosche's leadership, including the $11.5 billion purchase of Travelers Cos. life business in 2005, Steinberg said.

"He has the merger and acquisition experience that is crucial to AIG right now," he said.

Benmosche's appointment should be well received among investors, based on his experience and track record, said Donald Light, a Celent analyst who covers AIG.

"I think it removes one big element of uncertainty -- who will be the chief executive, which is always a big positive," Light said.

His past successes also should be perceived as positives, Light said.

"He has the international experience, which is good," he said. "He's certainly got a good grounding, a very intensive grounding, on the life side, which is a very important part of AIG. He has that experience in taking MetLife public, and that's close enough to what AIG is doing with its special purpose vehicles -- what they want to do with them is a way of going public, broadly speaking."

AIG has created three special purpose vehicles: One holds the equity of Chartis, it's new property/casualty entity, and the others hold the equity of American International Assurance Co. Ltd. and American Life Insurance Co. AIG may seek to sell up to 20% of the equity in each of the three SPVs through private investors, initial public stock offerings or both (BestWire, July 27, 2009).

AIG nearly fell into bankruptcy in September, and has been kept solvent by a federal rescue that now totals up to $182.5 billion in loans and other aid while trying to restructure its businesses and sell assets to repay the government.

Benmosche replaces Edward Liddy as chief executive. Liddy, who is also chairman, told the board in May that he wanted to leave his $1-a-year position as soon as he can be replaced. At that time, the company said the board accepted Liddy's recommendation to split his position, and will separate the responsibilities of the chief executive and chairman (BestWire, May 21, 2009).

"Ed Liddy's appointment was a temporary solution," said Steinberg. "Mr. Benmosche is providing a fresh set of eyes to come in and look at the different insurance assets, and see where they can apply the best strategies to move forward."

Most AIG insurance companies currently have a Best's Financial Strength Rating of A (Excellent) with a negative outlook.

Shares of AIG (NYSE: AIG) were $13.44 in afternoon trading on Aug. 4, down 1.1% from the previous close.

(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest.com)