Posted on 15 Nov 2010
AIG CEO Robert Benmosche, who took over the reins at the insurer August 2009, sat down for an interview with the Wall Street Journal, discussing what needs to be accomplished before year end to prepare for the government's exit, the head winds facing its insurance businesses, among other issues, including his recently disclosed cancer diagnosis. Following are excerpts from the interview:
WSJ: AIG recently mapped out an exit-strategy plan to show investors and customers how the company intends to repay the government. Why do this and what has been the effect so far?
Mr. Benmosche: If you're a customer, you want to know whether this company is going to make it or not. Many people were saying we're a ward of the state, that there's no way we could pay back the taxpayers. But if you do an analysis, this is at least a $70 billion company and we will have about 1.8 billion shares. Our recent quarterly earnings [for core insurance operations] show we can earn $8 billion to $9 billion pretax income annually if other charges and write-downs stop occurring.
All the numbers come together and say the government will be able to sell its shares at some price in the future. It's math; it really isn't about pie in the sky.
I recently met with 100 of our biggest corporate customers, and with almost 80 of the top independent producers that sell our life-insurance and retirement products. They are satisfied with the announcement, but they want to see the repayment happen. That's the real issue: Stop being talked about and perform. They don't want the uncertainty and they want to know that AIG is not going to embarrass them again.
WSJ: What needs to be done between now and year end?
Mr. Benmosche: We want to be ready by Jan. 1 with a solid investment-grade company with very good horizons. The credit-rating agencies want to make sure that our businesses are in fact stable and positioned for growth. But, more importantly, they are focused on our stress-testing and sources of liquidity after [our loan from the Federal Reserve Bank of New York] is taken out.
We need to demonstrate to them that if we hit another perfect storm, this ship ain't going to sink. We are now working through the last phases of de-risking AIG Financial Products [the unit that made risky mortgage bets], looking at our exposures to the housing market and other funding issues.
WSJ: What is your view of challenges facing AIG's remaining life and property and casualty-insurance businesses, such as sustained low interest rates and the soft market for commercial insurance?
Mr. Benmosche: We are No. 1 in the bank distribution system in selling fixed annuities, but sales are down—and they are down for the industry—because it's tough to get people to commit money when interest rates are so low. But we still did almost $1 billion in sales last quarter in fixed annuities. On commercial insurance, I don't think the soft markets are harder on us than anyone else. The fact is, some people dropped us earlier on, but we expect to see some of that business come back because people need what we do.
WSJ: Can you share a bit more about AIG's CEO succession planning in light of your cancer diagnosis?
Mr. Benmosche: At our next board meeting we will discuss the criteria [for a permanent CEO], and then next January, we will sit down and assess people against the criteria and get a sense of potential candidates. If I thought I would die in three weeks, I would have said to Steve [Robert S."Steve" Miller, AIG's chairman]: Look, I need to be out of here in three weeks. I don't know what my life span will be yet, or what the full signs will be, but what I do know is that I'm not sitting here with just a couple of months.
Sometime in the first quarter, I'd like to reach a fork and tell Steve what I'm finding out from the doctors. If the prognosis is good, and I've got enough horizon and good health, then I would like to see the government get sold out. But if at that point we find maybe it's a little too tenuous and there's still concern, then I will ask the board to start a more serious discussion on how they will deal with succession.
If anything has significantly deteriorated, I am going to obviously have to disclose it because if we do a stock offering in March, I have to feel compelled to do it. Steve Jobs and Apple were severely criticized for the secrecy that went on in his case, and Steve Jobs is a huge contributor to Apple. Not to say I'm not a contributor, but my role in AIG today is clearly not the same as his. We chose to disclose [the cancer] early and say this is how we're going to deal with the succession plan.
WSJ: How much does the board know about your condition since you haven't told them what form of cancer you have?
Mr. Benmosche: I have the AIG doctor checking with my doctors; he also checked with Sloan [Memorial Sloan-Kettering Cancer Center] and other institutions to talk about what the sense is.
It's important that for a company that gets this close to the finish line, I don't screw it up. I get that part. I don't want my cancer or my health to screw it up.
WSJ: Some people within and outside AIG have said they feel your illness could be a setback that potentially delays the company's recovery. What are your thoughts?
Mr. Benmosche: I disagree that it would be a setback for AIG if I have to stop working. This company is here not just because of me. I had to provide some very strong guidance and deal with some very tough times early on, but you now have a competent management team here.
I'm confident that, if I got run over by a truck, Steve can step in [as interim CEO] and work on it for a short period of time and assess what the board wants for a new CEO. And there should be a lot more people this time willing to step up than there were about a year ago.
I think it would be an emotional setback for some people—not getting to the finish line when I would like to have been able to do that. But life goes on and we all know that. And I think for this company, we're in good shape, the people, the board and everyone else.