Edward Liddy, before he stepped down as American InternationalGroup's embattled chair and chief executive last week, wrotecompany employees to tell them that despite liquidations to repaygovernment loans, the company is undergoing a rebirth, not abreakup.

The former head of Allstate, whobecame AIG's CEO last fall when the government assumed a 79.9percent interest in the financially strapped firm, said in an Aug.7 letter that he was going back into retirement with “$1, a fewbruises and a feeling of hard-earned accomplishment.”

Mr. Liddy's bruises were an apparent reference to the batteringhe took from congressional critics and New York Attorney GeneralAndrew Cuomo when the firm, which has taken billions in governmentloans, gave out bonuses to executives–including those with AIG'sFinancial Products unit, which had nearly forced the company intobankruptcy.

Although AIG only paid him $1 in annual salary, the firmreported in May that he had received $460,411 in work-relatedbenefits last year. Its filing with the Securities and ExchangeCommission said that included $47,578 to pay for air commutes fromhis Chicago home to AIG in New York; $38,368 for a New Yorkapartment; $31,348 for car services; and $180,431 toward histaxes.

AIG also paid Mr. Liddy's attorney $162,686 for work “to developappropriate compensation structures for Mr. Liddy and other AIGsenior employees in the current circumstances.”

Mr. Liddy, who had retired from the top post at Allstate only totake on the AIG assignment in September 2008, announced in May thathe would be retiring.

He was replaced as president and CEO on Aug. 10 by RobertBenmosche, who had retired four years ago as head of MetLife.

Harvey Golub, former chair and CEO of American Express, tookover for Mr. Liddy as non-executive chair of AIG on the same day,after becoming a member of the AIG board earlier this year.

On his last day on the job, AIG reported its first profitableresults–net income of $1.8 billion–after posting losses in sevenprevious quarters, although the company's property and casualtyinsurance units saw results deteriorate due to the soft market, thepoor economy and lingering reputational damage.

In his farewell letter, Mr. Liddy said that his brief buttumultuous tenure as head of AIG “hasn't been easy, and goodnessknows, it hasn't been pretty.”

“Truth be told, I had no idea what I was in for when I acceptedthis assignment, but I am glad that I came,” he wrote. “What hasmade the difference is that the people of AIG are tremendouslytalented and are doing their best to help AIG work out of thisfinancial crisis for the benefit of clients, shareholders andtaxpayers. Without your strength and can-do attitude, we could nothave been successful.”

He wrote that “together, we have been executing a strategy toreturn value to taxpayers by capturing the value of our assets andreducing the excessive risk from our Financial Products group.”

He noted that “despite challenging market conditions, we'vereached agreement to sell well over 20 business lines and otherassets. We also have an agreement with the Federal Reserve thatwill reduce AIG's debt by $25 billion” once special-purposevehicles are put in place later this year.

However, he emphasized, “although some might characterize what'snow underway at AIG as a breakup, it's really more of arebirth.”

He wrote that “AIG has been stabilized and has a plan to put itsprincipal businesses on a path to rebuild value. And we just turnedin our first profitable quarter since September 2007. For this, wecan all be very proud.”

As for his own status, he wrote, “this afternoon, I will returnto retirement with $1, a few bruises and a feeling of hard-earnedaccomplishment. I do not intend to linger or second-guess newmanagement or policymakers. I do, however, plan to find ways topass on the lessons of this extraordinary phase of Americanfinancial history to our next generation of business leaders.”

He wrote that “America has lost confidence in corporations.Restoring that confidence is the first step toward regaining ourfooting in the global economy. I will do my best to help.”

He concluded by thanking AIG personnel for their “remarkableefforts during the past year. I firmly believe that good days areahead for all of us.”