Greenberg Reveals AIG Russian Goof
By Jim Connolly, NU Life-Health Senior Editor
NU Online News Service, May 13, 12:27 p.m. EST, New York?AIG moved into the Russian market too quickly, AIG boss Maurice Greenberg revealed at an industry conference here.
The chairman and chief executive officer of New York-based American International Group made his disclosure during a talk in which he advised that acquiring new companies and entering new markets should not be done too rapidly.
Mr. Greenberg, who is known for running a tight ship, also advised that a company's success is achieved through discipline.
Discipline, he said, is important in achieving consistent earnings. "It is not easy. It takes many years to get there and it takes discipline." His discussion of good company management and the challenges in international expansion were made during the 12th annual PricewaterhouseCoopers life insurance conference.
"Distribution is critical. I think about it all the time," Mr. Greenberg said. But execution is as important, he added.
Employees must understand what is acceptable and management has to see that it is occuring, he said. If it doesn't, then management is to blame, Mr. Greenberg added.
Success in foreign markets depends on factors including being the first to open a market and paying the right price if a company is expanding through acquisition, Mr. Greenberg said.
For instance, Mr. Greenberg said that AIG has been in China since 1975 and is currently expanding to cities including Beijing and Suzhou.
Establishing a presence is not an easy thing to do, he continued. "You can't send in second-tier management and it takes time to build relationships."
A potential new geographic market must be "a country of laws," he added.
Mr. Greenberg said that AIG entered the Russian market too early, but added that he is more confident in Russia now that there is a better framework for foreign companies.
On acquisitions, Mr. Greenberg returned to the issue of price, noting that "you can't be in a rush if you want to expand by acquisition."
He added that acquiring a commercial bank held no real interest because of that industry segment's small profitability and its volatility.
On the company's own recent stock price movement, Mr. Greenberg said, "We're responsible for earnings, not the price of our stock."
Mr. Greenberg noted the company's $180 billion in market capitalization and its price-to-earnings ratio. He also noted that other large, well-capitalized companies such as General Electric have also come under market pressure lately. This is a "temporary phenomenon," he said.
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