Treasury’s Exit Revives Questions About AIG’s Succession Plans

The government said Tuesday it will raise $7.6 billion through the sale of about 234 million common shares. The offering closes on Friday. At $32.50 a share, the sale's price matches what Treasury received when it sold an even larger slug of stock in September.

"There is a saying that in American life, there are no second acts," Mr. Benmosche wrote Tuesday in a letter to employees. "Well, take a bow, because today marks our second act."

Tuesday's sale is also a milestone for Mr. Benmosche, who overcame a serious health scare and deep skepticism about AIG's future to reclaim the company's independence from government ownership. A former CEO of MetLife Inc., he came out of retirement to run AIG in August 2009, vowing that the company would pay back its bailout and that taxpayers would earn a profit. By Treasury's calculation, the final round of sales means the government will have a net positive return on its AIG bailout of $22.7 billion.

With both of Mr. Benmosche's goals now accomplished, investors may increasingly focus on the company's choice for his successor.

The company is considering both external and internal candidates, people familiar with the search said.

Mr. Benmosche was traveling in Europe Tuesday and unavailable for comment on his possible retirement plans, a spokesman said. The spokesman said the 68-year-old CEO is prepared to stay on as CEO through 2014, when he expects the board to reach a decision on his successor.

Mr. Benmosche disclosed two years ago that he had developed cancer and has gone through treatments while running AIG. Though his health currently is good, that situation could change and is one reason the board two years ago retained executive-recruitment firm Spencer Stuart, according to people familiar with the situation.

Among the leading internal candidates is Peter Hancock, a former J.P. Morgan Chase Inc. banker whom AIG picked to run its property-casualty business in March 2011.

"He's changing the culture of risk underwriting over there," and has improved the unit's management team, said Jim Millstein, the Treasury Department's former chief restructuring officer who now runs Millstein & Co., a financial- advisory firm. But "it's a work in progress. This is a big turnaround."

Mr. Hancock "is a very strong contender" to succeed Mr. Benmosche, though the CEO "is not on the verge of stepping down," one of the knowledgeable people said. Board members so far "have made no decision on who will be Bob's successor," this same person said. The succession planning is "a long-term project," the person said.

During these deliberations, Mr. Benmosche has repeatedly said that he was "good to go longer," but knows he serves at the board's pleasure, the person said.

Spencer Stuart hasn't yet interviewed any external candidates, another informed individual said. The search firm has assessed internal prospects against possible outside ones, and will approach external contenders when directors give the green light, according to this person.

Mr. Benmosche and his team have publicly declared a series of "aspirational goals" for AIG's postbailout future, as the company refocuses around its global property-casualty unit and its U.S. life insurer. The goals include boosting AIG's return on equity to above 10% by 2015, slashing costs and deploying up to $30 billion in capital on share buybacks, dividends or acquisitions.

"My job now is to urge each of you to face tomorrow--bring on tomorrow--with the focus and determination that brought us to this point," he wrote in the letter to employees. "What a way to end the year. How are we going to top this next year?"

AIG's $182 billion rescue package effectively nationalized the insurer in an attempt to stave off a world-wide financial apocalypse.

At the time, AIG was a leading seller of property-casualty and life insurance around the globe, but got into trouble primarily as a result of complex financial instruments sold to other financial firms. The company sold much of the overseas life-insurance empire to help pay down its government debt; this week, it announced the planned sale of up to 90% of an airplane-leasing business.

Insurance analyst John Nadel of Sterne Agee said in a note to clients Tuesday that AIG's management "can now devote 100% of its attention to driving returns and improved financial performance."

In an August report, Moody's Investors Service noted that the credit profile of AIG's property-casualty unit should strengthen over time with changes since the appointment of Mr. Hancock. Those include a sharper focus on less-risky consumer and commercial insurance lines.