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Greenberg out, AIG stock sinks
Insurer delays financial results as new CEO Sullivan tries to reassure Wall Street.
March 15, 2005: 1:59 PM EST
Maurice Greenberg, AIG's second ever CEO, has been ousted amid ongoing SEC and NY Attorney General probes.
Maurice Greenberg, AIG's second ever CEO, has been ousted amid ongoing SEC and NY Attorney General probes.

NEW YORK (CNN/Money) - American International Group will delay its annual results as the financial services giant juggles a recent shift in top management, regulatory probes and the specter of a downgrade, new CEO Martin Sullivan said Tuesday.

AIG said it hopes to file its annual report, which had been due Wednesday, sometime in the next two weeks, blaming the delay on the departure of longtime chief executive Maurice "Hank" Greenberg as well as an internal accounting review.

New Chief Financial Officer Steven Bensinger said in a conference call Tuesday that the insurer does not expect any significant changes in the company's financial position.

But AIG (down $1.98 to $61.87, Research) shares sank more then 3 percent in heavy afternoon trading on the New York Stock Exchange.

"We had record results in 2004 and we're off to a good start in 2005," Sullivan said during a conference call with analysts. "With regard to any regulatory issues, I would like to get these behind us and soon as possible and move forward."

Greenberg out

Greenberg was forced out as CEO amid an investigation by New York State Attorney General Eliot Spitzer and the Securities Exchange Commission into a reinsurance deal with Berkshire Hathaway's General Reinsurance unit four years ago.

Regulators contend that they company used the deal to artificially boost AIG's balance sheet; and there has been speculation that Greenberg was personally involved.

"As a result of Hank's leadership, AIG today is the largest and best-capitalized insurance and financial-services organization in the world; however, the board has concluded it is now in the best interest of AIG's shareholders, customers and employees to turn to a new generation of leadership," Frank Zarb, chairman of the AIG board's executive committee, said in a statement.

Greenberg, 79, will serve as non-executive chairman. The shake-up also resulted in the departure of Chief Financial Officer Howard Smith, who was replaced by Bensinger, and the promotion of Donald Kanak to executive vice chairman and chief operating officer, focusing on Asia.

Greenberg joined the company in 1960, became president in 1967 and expanded AIG from a firm concentrating on life insurance in Asia and property-casualty insurance in the United States into the world's largest insurer and a financial-services powerhouse.

Described as a man who ruled the company with an iron hand, his autocratic management style rubbed many the wrong way. Two of his sons -- Jeffrey Greenberg, 53, and Evan G. Greenberg, 50 -- both spent part of their careers at AIG, but eventually left the company for other insurance opportunities.

Jeffrey Greenberg was forced out at the company he was running -- insurance broker Marsh & McLennan -- after a bid-rigging probe led by Spitzer's office.

Hank Greenberg's successor, Sullivan, is the company's third ever chief executive.

Battle weary

Once one of the most revered names in insurance, AIG now faces numerous inquiries by regulators, most notably over charges of bid rigging and price fixing, earnings manipulation through financial reinsurance, violation of federal securities laws and underreported commissions to a firm owned by Greenberg and other top AIG executives.

The scandal pushed two firms to eye AIG's credit rating. Standard & Poor's placed AIG's AAA long-term credit rating on credit watch with negative implications, citing the management changes and the investigations.

The firm said the credit watch status "will be resolved following the filing of AIG's 2004 10-K."

Also on Tuesday, Fitch Ratings lowered AIG's long-term issuer rating and unsecured senior debt obligations to AA-plus from AAA.

Sullivan said that downgrades would not affect future earnings. "Our internal reviews are underway and we can say with a reasonable degree of assurance that we don't think it will have any affect on our financial situation," he said.

Former AIG executives have pleaded guilty to charges stemming from Spitzer's ongoing probe into bid-rigging and fraud in the insurance industry.

Investors, in a 25-minute call with company executives, focused on AIG's regulatory problems and ratings actions.

"We cannot ignore the issues that we have and that the industry has to address. Our success will be measured in a large part on how well we address these issues," Sullivan said during the call.

"I would like to get these (regulatory issues) behind us as soon as possible," he added.

-- from staff and wire reports  Top of page


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