Greenberg to Retire as AIG Chairman

March 29, 2005

The various investigations of giant insurer American International Group are continuing to take their toll. Maurice “Hank” Greenberg will step down as Chairman of American International Group’s Board of Directors later this week, ending his more than 40-year relationship with AIG.

Also, Warren Buffett, the well-known investor and chairman of Berkshire Hathaway, owner of General Reinsurance, one of whose transactions with AIG is part of the probes, will be questioned by regulators on April 11, one day before Greenberg is to be grilled.

A legendary figure, and a controversial one, Greenberg resigned as AIG’s CEO earlier this month (See IJ article March 15). Since then pressure has continued to mount from investors that he step aside entirely as the probes continue to erode the world’s largest insurer’s share price.

About two weeks after he gave up his post as chief executive officer but retained a title as chairman, Greenberg has decided to relinquish his seat on the board and completely retire.

His resignation follows reports that AIG had uncovered evidence that some of the company’s filings with the Securities and Exchange Commission and the New York State Insurance Department might have contained inaccuracies worth as much as $1.5 billion. Greenberg was one of 12 directors who received supoenas on March 28, asking him to give evidence concerning AIG’s finances.

Most of the accounting transactions being audited involve AIG’s relationships with various reinsurers, including General Re and Barbados-based Richmond Insurance Co. and Union Excess Reinsurance Co. AIG’s relationship with Starr International Co., which handles deferred compensation for AIG executives, is reportedly also under review. (see IJ article on March 25)

Greenberg, who is traveling, announced his retirement in a letter from his lawyer, David Boies. (See IJ article March 29) The letter said the retirement would take effect when he returns from his trip.

Frank Zarb, the former NASD chairman and chief executive, who is the lead director on the AIG board currently, will assume Greenberg’s duties as non-executive chairman until a new chairman is selected.

Meanwhile, Buffett has been called by regulators interested in whether he had any knowledge or involvement in a reinsurance transaction in 2000 between General Re and AIG. According to the Wall Street Journal, Buffett’s interview is scheduled for April 11 with lawyers from the offices of New York Attorney General Eliot Spitzer and the Securities and Exchange Commission.

Greenberg is scheduled to give a deposition on April 12.

On March 27, AIG dismissed another longtime executive, Michael Murphy, “for failure to cooperate with investigators,” a fate known as well to former Chief Financial Officer Howard I. Smith, who was ousted for similar reasons.

According to the Journal, it is not yet known whether new CEO Martin Sullivan was aware of the deals now under investigation. But the newspaper cited unidentified sources as saying he isn’t among the executives who have received subpoenas.

AIG’s stock has lost almost a quarter of its value since Feb. 11, when it first reported receiving subpoenas from the SEC and Spitzer.

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