NEW YORK – American International Group Inc. (AIG) is shuffling its management ranks, ousting longtime CEO Maurice "Hank" Greenberg (search) and naming a trio of new executives as the insurance and financial services company works to resolve regulatory inquiries.
Greenberg, 79, will retire but remain nonexecutive chairman of the company he built into a financial titan over 37 years as chief executive.
In an announcement late Monday, the New York-based company said vice chairman and co-chief operating officer Martin J. Sullivan (search), 50, was promoted, becoming AIG's third CEO.
"As a result of Hank's leadership, AIG today is the largest and best capitalized insurance and financial services organization in the world," independent board member Frank Zarb said in the statement, which did not quote Greenberg. "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, and we are pleased that Hank Greenberg will assist in the transition."
AIG also said its annual report, which was to be filed on Wednesday, would be delayed because of the management shakeup and internal accounting review. That review is not expected to result in "significant changes to the company's financial position," according to the statement.
Greenberg was only the second chief executive of the insurance giant, leading the New York-headquartered company with an iron hand since he replaced founder C.V. Starr after his death in 1968. A graduate of New York Law School, Greenberg has been with the company since 1960.
The move came amid a widening investigation of AIG by New York Attorney General Eliot Spitzer, federal prosecutors and the Securities and Exchange Commission (search). The regulators are looking into the use of so-called finite insurance, or financial reinsurance, which critics say could be used to manipulate earnings.
One of the transactions being probed took place between AIG and Berkshire Hathaway Inc.'s General Reinsurance unit four years ago and apparently was intended to shore up AIG's reserves. Reports have said Greenberg was personally involved.
On Tuesday, Fitch Ratings service lowered AIG's long-term issuer rating and unsecured senior debt obligations to AA-Plus from AAA, citing the "uncertainties and disruptions" of the investigations and management changes. Standard & Poor's Ratings Services, meanwhile, put AIG's AAA long-term counterparty credit rating on its credit watch list "with negative implications."
In its announcement, AIG also said that it was making several other changes in its management team:
-- Donald P. Kanak, 52, was named executive vice chairman and chief operating officer, focusing on Asia. He previously was vice chairman and co-chief operating officer with Sullivan.
-- Steven J. Bensinger, 50, was selected as chief financial officer, replacing Howard I. Smith, 60, who "has taken leave," the company said. Bensinger also was named an executive vice president and will retain his previous titles of treasurer and comptroller.
Greenberg's departure as CEO was the third such high-profile departure in recent weeks. The boards of Hewlett-Packard Co. and Boeing Co. have recently forced out CEOs.
Greenberg is the head of an insurance industry dynasty.
His son Jeffrey W. Greenberg resigned last October as chairman and chief executive of the insurance brokerage Marsh & McLennan Companies Inc. (MMC) amid an investigation by Spitzer into bid rigging, price fixing and hidden incentive fees. Marsh & McLennan reached a settlement in the case Jan. 31, agreeing to pay $850 million in restitution.
Another son, Evan G. Greenberg, is president and chief executive officer of Bermuda-based ACE Ltd.
With a market capitalization of $168.5 billion, AIG is one of the largest insurance companies in the world. And Maurice Greenberg is one of the company's largest individual shareholders.
According to recent filings with the Securities and Exchange Commission, Greenberg directly controls more than 43.3 million AIG shares and indirectly controls an additional 23.7 million. The company had 2.64 billion shares outstanding in 2004.
Sullivan, who is British, joined AIG in 1971 in London. He held a number of management positions before assuming the posts of co-chief operating officer and vice chairman in May 2002. At that time, he also was named one of seven members of the "office of the chairman" and added to AIG's board.
In a statement accompanying the announcement, Sullivan said it was "a daunting task to step into the shoes of Hank Greenberg."
He added: "The company is committed to cooperating with the governmental authorities in their ongoing investigations. We take these matters seriously and want to bring them to resolution."
The probe of finite insurance is the latest in a series of regulatory woes for AIG.
Earlier, AIG was mentioned in the case Spitzer brought against Marsh & McLennan, but was not formally charged. But four former AIG executives have entered guilty pleas to criminal charges stemming from the investigation.
Last November, AIG agreed to pay $126 million to settle allegations of securities fraud by the SEC and the Justice Department related to three 2001 transactions it made with PNC Financial Services Group Inc. that allegedly helped the Pittsburgh-based banking company artificially inflate its earnings.
Part of the settlement also went to resolve a similar case involving Brightpoint Inc., a Plainfield, Ind., cell phone distributor.
Under that settlement, an independent monitor is examining AIG's books to see if there are any other questionable deals.