AIG's Liddy Replaced By Retired MetLife CEO Benmosche

NU Online News Service, Aug. 3, 3:07 p.m. EDT

Robert Benmosche, a former chairman and chief executive officer at Metropolitan Life, has been named to head American International Group, replacing CEO Edward Liddy, who took the reins last year when the government agreed to rescue the company.

AIG said the company bord in addition to giving him the titles of of president and CEO had elected Mr. Benmosche to the board. He will , and will assume his new posts on Monday on , with the retirement of Mr. Liddy.

The firm also announced that Paula Rosput Reynolds, vice chairman and chief restructuring officer, has decided to leave the company effective late in the third quarter.

When Mr. Liddy announced in May that he would be retiring the company said he had board agreement that the roles of chairman and CEO be separated, and AIG would conduct a search to fill each position with participation by both the reconstituted board and the Trustees of the AIG Credit Facility Trust–the three-member group monitoring the government's interest in the company. The company announcement of Mr. Benmosche's appointment did not mention the chairman's post.

Mr. Benmosche, 65, is a former securities industry executive who took Metropolitan Insurance Company public in 2000 and built it into what is considered by some measures as the largest U.S. life company. He retired in 2006.

A former MetLife executive who worked closely with Mr. Benmosche before leaving the company described him as a tough manager who is numbers-oriented and not easily pushed.

Mr. Liddy, a retired Allstate CEO, took the AIG post for $1 a year and equity grants when the government took a 79.9 percent interest in the conglomerate in exchange for billions in taxpayer backing for the loss-riddled company. Mr. Liddy replaced Robert B. Willumstad.

Mr. Liddy during his tenure has been blasted by congressional critics for payment of big executive bonuses that he said were required by contract and necessary to keep competitive talent at the company.

The executive who worked with Mr. Benmosche asked for anonymity before giving background on the new CEO. He commented, "Don't expect Mr. Benmosche to be a punching bag when he talks to Congress. He will speak his piece and will not take the abuse Mr. Liddy did when explaining his position [to members of Congress]."

The source said Mr. Benmosche is more of a "chief operating officer-type than a hands-off CEO. He operates in the numbers."

"Managers at AIG ought to be stepping up their efforts, because he will demand results," the source said. "He will take home reams of reports, and he will come back the next day ready to ask the tough questions."

The source noted there has been speculation that MetLife was recently negotiating to acquire ALICO, its former American Life Insurance Company unit.

As part of an agreement to secure more aid from the government in March, AIG said it would create a special purpose vehicle as a first step in spinning off ALICO, the home of its foreign life insurance operations.

ALICO, based in Wilmington, Del., was organized in 1921 and now has operations in 54 markets around the world. The company sells life, health, retirement and wealth management products and services through a network of about 40,000 agents, brokers and financial institutions. The company also has 11,000 employees and 19 million customers.

"It will be interesting how that will work out with Mr. Benmosche across the table from his former MetLife colleagues, although I do not know whether that bodes well or ill for that deal," the executive said.

Mr. Liddy, the former chairman and CEO of Allstate, Northbrook, Ill., took over AIG last September as chairman and chief executive officer at the request of then-Treasury Secretary Henry Paulson as the price for the government's decision to supply AIG with more than $80 billion in new capital.

While Mr. Liddy was successful in stabilizing AIG, he has endured a firestorm of controversy from a Congress outraged at the payment earlier this year of bonuses, particularly to AIG employees involved in the financial products unit that caused the firm's major losses.

Last year, soon after Mr. Liddy took over, AIG's decision to hold a sales meeting for its brokers and dealers at a luxury resort also stirred controversy.

When he took over, he found that AIG was contractually obligated to pay claims on mortgage-backed securities through sale of so-called credit default swaps with a notional value of $2.77 trillion, according to congressional testimony.

It also secured bets on mortgage-backed securities, some of them backed by subprime mortgages, collateralized by more than $77 billion of securities owned by its life insurance units.

It has since whittled down both liabilities substantially, a portion through sale of the troubled MBS to the Federal Reserve.

Mr. Benmosche joined MetLife from brokerage firm Paine Webber in 1995 and became CEO in 1998.

He converted MetLife from a mutual to a life insurer in 2000, raising $2.51 billion in an initial public offering priced at $13 a share. The stock rose to $65.50 last year before getting caught in the economic downdraft. It is selling today at approximately $35.50.

Mr. Liddy in a statement said Mr. Benmosche "understands the challenges and opportunities of restructuring complex organizations. Our stakeholders can look forward to a seamless transition and rest assured that the work of rebuilding the value of AIG's businesses and repaying the government will continue uninterrupted."

Dennis Dammerman, chairman of the AIG board 's search committee said that Mr. Benmosche's background and experience "makes him well-suited to lead AIG in the next phase of its restructuring. We are confident he will continue the substantial progress the company has achieved under the leadership of Ed Liddy. Ed answered the call for public service amid an extraordinary financial crisis that has only now begun to ease, and our company and country owe him a debt of gratitude."

Greg Case, president and CEO of Aon Corp., insurance brokerage reacted to the change in AIG leadership with a statement saying, "We all owe Ed Liddy a debt of gratitude for all of his hard work and effort on behalf of AIG and the insurance industry. Ben Benmosche is an excellent choice to succeed Ed in taking up the mantle of leadership to guide AIG, and I congratulate the AIG board of directors for his selection."