New CEO Sullivan: AIG Will Get Bigger

New CEO Sullivan: AIG Will Get Bigger

By Daniel Hays

NU Online News Service, March 15, 2:23 p.m. EST?Martin J. Sullivan, 50, who replaced Maurice Greenberg overnight as the American International Group's chief executive reassured analysts today that the giant company will continue to grow under his leadership.[@@]

The market did not immediately respond. In the hours after the company?s Webcast conference call AIg shares, which trade on the New York Stock Exchange had declined. Fitch Ratings moved the company's long-term issuer and debt ratings down to "double-A-plus" (with a stable outlook) from "triple-A" (with a negative outlook), while affirming the "triple-A" insurer financial strength ratings" of the AIG operating companies. Other rating concerns put the firm on watch.

Mr. Greenberg, 79, who remains with the company as non-executive chairman, was moved out as CEO by the board last night in the face of mounting pressure from investigators looking into a variety of the company's income smoothing transactions they find questionable. He had occupied the top executive post for 38 years.

Inquiries by New York Attorney General Eliot Spitzer and the Securities and Exchange Commission have lately focused on a deal with Gen Re suspected of providing a false financial picture of AIG's reserves, according to various press reports. Mr. Greenberg is reported to have hired a criminal attorney to represent him in the case.

The board also ousted Chief Financial Officer Howard I. Smith and would give no details about the move, saying only that he had taken leave.

Mr. Sullivan, who formerly held the post of vice chairman and co-chief operating officer, was also given the title of president.

In a conference call, Mr. Sullivan repeatedly stressed that the company would not be hurt by the change in management promising it would retain its "entrepreneurial focus." The management team, said Mr. Sullivan, has strategies in place to meet company earnings targets and "will take the company to new heights."

Meanwhile, the firm has postponed the filing of its 10-K financial form with the SEC. The form, which was due tomorrow, has been delayed, the company said, during an internal review of "the accounting for certain transactions," which began after the authorities began examining the company.

According to an AIG announcement, the review is not likely to result in significant changes in the company's financial position.

However management said today that while the review is intensive, no one could predict what the outcome would be or possible effects on earnings.

Steve Bensinger, who took over as chief financial officer from Mr. Smith last night, said the company hopes to file the form within two weeks. He said a federally required assessment of internal controls is ongoing and would not be complete until the form is filed.

To date no weakness in internal controls has been identified, said Mr. Bensinger, but he cautioned a review is underway and he could not rule anything out including an auditors' finding of non-compliance.

Asked if the company could remain proactive and speedy with the introduction of new products in the face of regulatory pressures, Mr. Sullivan said it would because the company has checks and balances in place now to make sure its actions are proper and "the entrepreneurial culture of AIG is the bedrock of our success."

He also said that AIG, with 2004 net income over $11 billion, would not register any significant effects on collateral because of ratings changes.

Mr. Sullivan, whose focus has been on the property-casualty side of the business, when asked about his knowledge of the life division said the "management team" has its "hands around all the units at AIG."

Update:At the market close AIG shares were down 3.02 percent dropping $1.93 a share to $61.92.