Must Read - AIG's Benmosche Threatens to Jump Ship, Wall Street Journal

Anyone following top executives has to read today’s story by Liam Pleven, Serena NG, and Joann S. Lublin in the Wall Street Journal. The column is entitled, AIG’s Benmosche Threatens to Jump Ship. Benmosche, AIG’s hard charging CEO, appears to be exacting pressure on the AIG board and the Obama Administration.

At a board meeting last week, the strong-willed industry executive told fellow AIG directors that he was “done” but agreed to think it over after other board members reacted with shock, according to the people.

… It isn’t clear whether Mr. Benmosche would actually resign. In his short tenure at AIG, he has developed a reputation for making provocative remarks and ruffling feathers as he seeks to achieve his goals.

He has only been CEO for three months and continues to make waves. He has a little of AIG’s famous former CEO Hank Greenberg in him. Check out the story.

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Altantic Wire

CNN Money

Crain's NY

Clusterstock

AIG's Newest CEO in Trouble?

PEhub.com picks up a story in the Baltimore Sun in which the head of AIG’s newest CEO is called for.  According to the story, Maryland Congressman, Elijah E. Cummings,

… called yesterday for the resignation of American International Group’s top executive after news reports of another resort hotel event involving employees from the giant insurance firm.

Cummings has emerged as a prominent critic of AIG, which received a revised, $152 billion federal bailout package this week. The Maryland congressman was responding to a report by an Arizona television station that AIG executives participated in a recent training session for financial planners at a Phoenix resort.

AIG called the news accounts “misleading” and defended the conference as a legitimate business event for 150 independent financial planners. It said AIG’s expenses were “minimal” and that unnamed sponsors and the financial planners themselves paid 90 percent of the cost.

Edward Liddy, who was selected as AIG’s new CEO at the same time that the government bailout of AIG had been announced, finds himself in a tricky situation.  Appointed by the U.S. government (Hank Paulson) he is not yet at risk for his position but he needs to find a way to stay out the news for problems such as these.  AIG has far bigger fish to fry and cannot afford distractions of any kind.

CEO Watch List - Martin Sullivan, AIG - Is Out - Update 3

Chalk up another CEO to the sub-prime credit crisis.  AIG's CEO, Martin Sullivan was forced out yesterday, Sunday June 15th, after the company's board had an emergency meeting.  Sullivan will not only give up his CEO title he is also leaving the board.  AIG immediately selected Robert Willumstad, the current chairman and well known former Citibank top executive as AIG's new CEO. Willumstad will remain chairman.   The board also selected Stephen Bollenbach, chairman of US homebuilder KB Homes and former chief executive of Hilton Hotels, as the lead director.  

The dramatic changes came shortly after powerful activist shareholders expressed concern with AIG's management.  See my previous blog for additional details on the concerns raised by activist shareholders.  Sullivan leaves the world's largerst insurer according to Reuters,

... after it suffered two quarters of record losses from risky mortgage bets and its share price more than halved over the past year.

While the latest management changes were applauded by some of the key activist shareholders. In another Reuters piece Eli Broad was quoted as stating,

"Both are proven, experienced and successful financial executives," he said in an emailed statement. "I expect that they will attract badly needed, first-rate financial and investment executives to AIG."

The real question for me and many others is whether Willumstad is the right person for the position.  While he originally contended for the top Citibank position before Charles Prince another casualty of the credit crisis was appointed head of CitiGroup his background was in consumer banking.  He is not a real insurance guy.  According to report he did have insurance companies reporting directly to him when he was Chief Operating Officer of CitiGroup but that may not be sufficient.  At a minimum expect further management changes.  The Willumstad and Bollenbach appointments will not be sufficient alone to turn the huge AIG ship around but at least it is a well-needed start.

AIG is already in the process of searching for a new CFO.  Expect more changes as Willumstad works to get a handle on all the problems facing the firm.  He has already made a formal gesture of some kind to former CEO and Chairman Maurice Greenberg who was forced out under a cloud but still remains a huge stakeholder in the firm and thorn in its back.  For some time now Greenberg has been one of AIG management's greatest critics.  According to the Washington Times,

Greenberg has been one of most outspoken of AIG's shareholders, many of whom have blamed poor management for AIG's financial troubles. In a May regulatory filing, Greenberg wrote: "AIG is in crisis."

In assessing what might be next for the firm, Hugh Son and Dan Kraut of Bloomberg quoted an analyst from  UBS AG, David Havens who said,

"AIG needs to go through some sort of process to prove to the market that it completely understands the credit risk that it faces,'' ... "Some sort of internal and perhaps external study might be necessary here.''

Watch who AIG appoints as CFO and make sure to stay up-to-date on future management changes, there are sure to be more.  Willumstad has a tough task ahead of him, besides the sub-prime credit related problems, the insurance business has been straining lately under increasing claims due to weather and natural disasters.

For more:

Portfolio.com

MarketWatch

Business Insurance

AP

NPR (audio)

International Herald Tribune

CEO Watch List - Martin Sullivan, AIG, Update 1

Just a month ago I put AIG's CEO Martin Sullivan on my CEO watch list.  So far, Sullivan has managed to keep his job.  According to Felix Salmon of SeekingAlpha.com the Wall Street Journal has run another story today placing new pressures on Sullivan.  According to the WSJ article by Liam Pleven and Randall Smith,

American International Group Inc.'s embattled chief executive, Martin Sullivan, is now facing mounting dissent from some of his largest shareholders.

Two days before AIG's May 14 annual meeting, three major shareholders who effectively controlled more than 100 million shares -- about 4% of the company's stock at the time -- sent a blistering letter to the company's board....

... people familiar with the board say Mr. Sullivan needs to turn things around fast. Amid widespread turmoil in the credit markets, AIG has reported two consecutive record quarterly losses totaling $13 billion -- almost as much as the firm made all of 2006 -- and last month raised $20 billion to bolster its finances, a remarkable reversal for an insurer long prized by investors for its business savvy.

The added pressure of the WSJ article definitely turned the screw a bit more on Sullivan's chances to survive as CEO.  Keep a close eye on AIG and any new business decisions Sullivan and/or the company makes.

CEO Watch - Martin Sullivan, AIG

Back in early February I wondered if AIG's CEO, Martin Sullivan, might have been at risk for his job.  At the time, the company's auditor Pricewaterhouse Coopers LLC, found "material weakness" in AIG's accounting for credit-default swap contracts that translated into a huge drop in the company's stock. Despite my blog post, I did not believe Sullivan should have been added to my CEO Watch list.  Today, I am not so sure.  

AIG's surprise announcement earlier today that it posted a $7.8 billion first-quarter loss has put Sullivan in a really difficult spot.  According to a story by Colin Barr for Forbes,

AIG (AIG, Fortune 500) shares tumbled 9% Friday after the insurance giant posted a $7.8 billion first-quarter loss that was driven by another round of mark-to-market writedowns of mortgage-related positions. AIG said the latest quarter included a $5.9 billion pretax writedown of the value of the credit default swap portfolio held by its AIG Financial Products unit, and a $3.6 billion impairment of its mortgage-backed securities holdings.

The spin is already on.  Will shareholders and board members stay quiet as AIG (Sullivan) seems blind sided a second time in a row?  We will just have to wait and see.  For now, Sullivan stays on my CEO watch list.  Keep a close eye on AIG and PR that comes from the firm.

For more:

Financial Times

TheStreet.com

Bloomberg

Sub-prime Credit Crisis Takes Another Executive

American International Group, inc. AIG (NYSE), the insurance behemoth, has found itself added to the list of financial related firms who due to the impact of the sub-prime credit crisis was forced to announced a major tunorver of one its finance related executives. Yesterday AIG disclosed according to Crain's New York,

a fourth-quarter loss of $5.29 billion, or $2.08 per share, compared with earnings of $3.44 billion during the same period in 2006. The loss was due primarily to $11.12 billion worth of pre-tax losses in the Manhattan’s based company’s credit default swap portfolio.

Today as a direct consequence of AIG's loss, the company announced that Joseph Cassano, the head of the firm's financial products unit will be stepping down. According to a story by Hugh Son on Bloomberg,

Cassano co-founded the business in 1987 and built it into a unit providing financial guarantees on more than $500 billion of assets at year-end, including $61.4 billion in securities with ties to U.S. subprime mortgages. He will be replaced on an interim basis by William Dooley, 54, a senior vice president of the New York-based insurer's financial services businesses.

The real question is whether there are more management changes to come from AIG and if so, where? Stay tuned.

For more:

Financial Week

Is AIG's CEO, Martin Sullivan in Trouble?

Is AIG's AIG (NYSE) CEO, Martin Sullivan at risk to lose his job? Yesterday's surprise announcement (see 8k filing) that its auditor, Pricewaterhouse Coopers LLC, found "material weakness" in AIG's accounting for credit-default swap contracts translated into a huge drop in the company's stock. According to a story by Hugh Son and Jesse Westbrook in today's Bloomberg doubts are being raised by some concerning Sullivan's leadership.

"It is incomprehensible that yet once again, this company, its board, its CEO and CFO, and its independent auditors are saying the company doesn't have adequate controls," said Lynn Turner, former chief accountant at the U.S. Securities and Exchange Commission and now on the board of Guidance Software Inc. and the Colorado Public Employees' Retirement Association. "These people should all be held accountable."

The speculation on Sullivan's status at AIG seems premature for the moment. We will just have to wait and see. Stay tuned.

For more:

Portfolio.com
Reuters