Posted on 26 May 2009
The resignation of American International Group (AIG) Chairman and Chief Executive Officer Edward Liddy may give the troubled insurer a new opportunity to stabilize its business as it restructures itself, industry observers said.
"AIG is still in crisis mode, but the crisis has switched from capital to people and clients," said Stewart Johnson, of the insurance merger and acquisitions advisory firm PhiloSmith. "It has shifted from a need for capital to a need to retain talent and clients."
AIG said on May 21 that Liddy told the company's board he will leave his $1-a-year position as soon as he can be replaced. The company said the board has accepted Liddy's recommendation to split his position, and will separate the responsibilities of the chief executive and chairman.
The timing of Liddy's decision caught people within AIG by surprise, said Joseph Paduda, principal of Health Strategies Associates, who left a marketing leadership position in AIG health care insurance and has maintained contact with AIG insiders.
"There was surprise internally that Liddy resigned when he did," Paduda said. "He was expected to step down, but not so soon. The sense is, the guy's not young, there's a sense that he's worn out and just doesn't want to deal with this and who could blame him?"
Paduda said AIG employees he has spoken with said Liddy had earned "a significant amount of respect in the organization" for standing up to the criticism, but said, "People were sort of hoping there was going to be a change."
"The sense is, he's a good guy who was just overwhelmed" by the complexity of AIG's many businesses and the magnitude of its financial crisis, Paduda said.
Liddy, the retired CEO of Allstate, became the focus of intense political and media debate and criticism since he was recruited for the post by the Treasury Department last September. AIG nearly went bankrupt before being bailed out by the federal government that month, in a rescue program that has increased up to $182.5 billion in federal loans and other aid.
"I found the timing a little bit surprising, but he has been the public face of AIG and he had taken an awful lot of public criticism as the public face," said Donald Light, an analyst with Celent who follows AIG. "Both from his point view and I can understand it from the personal sense, and with new members coming on the board, someone possibly could have had a conversation behind scenes that it's time for a new public face, and new thinking, possibly."
One of Liddy's harshest congressional critics, Rep. Elijah E. Cummings, D-Md., has been calling for Liddy's resignation for months, and he lauded Liddy's decision.
"It became clear early on that Mr. Liddy was not the right fit for this position, and as time has progressed, he has continued to lose the confidence of the U.S. Congress and of the American people," Cummings said in a statement. "This was the right move."
Light said the impact of Liddy's resignation "is probably a neutral until we find out who the new person is going to be."
"The impact at AIG is mostly on distribution, the customers, and the agents and brokers selling the product," he said. "I don't think Liddy?s departure is going to have a big impact on their view."