AIG's Liddy 'Bruised,' But Not Bowed

Edward Liddy, before he stepped down as American International Group's embattled chair and chief executive last week, wrote company employees to tell them that despite liquidations to repay government loans, the company is undergoing a rebirth, not a breakup.

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

Mr. Liddy's bruises were an apparent reference to the battering he took from congressional critics and New York Attorney General Andrew Cuomo when the firm, which has taken billions in government loans, gave out bonuses to executives–including those with AIG's Financial Products unit, which had nearly forced the company into bankruptcy.

Although AIG only paid him $1 in annual salary, the firm reported in May that he had received $460,411 in work-related benefits last year. Its filing with the Securities and Exchange Commission said that included $47,578 to pay for air commutes from his Chicago home to AIG in New York; $38,368 for a New York apartment; $31,348 for car services; and $180,431 toward his taxes.

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

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

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

Harvey Golub, former chair and CEO of American Express, took over 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 profitable results–net income of $1.8 billion–after posting losses in seven previous quarters, although the company's property and casualty insurance units saw results deteriorate due to the soft market, the poor economy and lingering reputational damage.

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

“Truth be told, I had no idea what I was in for when I accepted this assignment, but I am glad that I came,” he wrote. “What has made the difference is that the people of AIG are tremendously talented and are doing their best to help AIG work out of this financial crisis for the benefit of clients, shareholders and taxpayers. Without your strength and can-do attitude, we could not have been successful.”

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

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

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

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

As for his own status, he wrote, “this afternoon, I will return to retirement with $1, a few bruises and a feeling of hard-earned accomplishment. I do not intend to linger or second-guess new management or policymakers. I do, however, plan to find ways to pass on the lessons of this extraordinary phase of American financial 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 our footing in the global economy. I will do my best to help.”

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