Greenberg Departs, AIG Stock Rises
By Daniel Hays
National Underwriter News
March 29, 2005
American International Group's share price rose today in the wake of news that the company chairman, Maurice Greenberg, was leaving his post and retiring.
The stock, which trades on the New York Stock Exchange, opened at $57.49 per share and had risen to $58.20 at the close of trading.
One analyst guessed that the market was reacting favorably to a positive response from New York Attorney General Eliot Spitzer, whose agency has been investigating various aspects of AIG dealings since last year.
Mr. Spitzer, according to a spokesperson, feels the replacement of Mr. Greenberg will help resolve his investigation and that the AIG board acted wisely.
The AIG board, which replaced Mr. Greenberg on March 14 with Martin Sullivan as chief executive officer, last night replaced him as chairman, putting lead director Frank G. Zarb in the chairman spot.
Board action came after Mr. Greenberg's attorney David Boies sent a letter notifying the directors that Mr. Greenberg planned on resigning as chairman and would retire.
Asked about the rise in stock price, Analyst Julie Burke at Fitch Ratings said her guess was the market was reacting to Mr. Greenberg's action and Mr. Spitzer's comments with the thought that the company is “better positioned to resolve the investigations.”
She noted that Fitch had previously downgraded AIG's rating to “double-A-plus” from “triple-A.” She said there room for the company to absorb some adverse developments.
AIG has postponed the release of its annual earnings statement and filing with the Securities and Exchange Commission while it investigates a possible earnings restatement, which some have speculated could exceed $1 billion.
Ms. Burke said the company, with $11 billion in earnings, is in a position to handle such a revision.
Mr. Greenberg in his letter of resignation did not mention what action he would take concerning his posts as president and chairman of C.V. Starr, the Bermuda-based company that is the ultimate parent of AIG, according to an analysis by the New York Insurance Department reported by A. G. Edwards & Sons.
An AIG spokesperson, Chris Winans, said, that he could not comment on “the status of those titles,” referring to Mr. Greenberg's roles at C.V. Starr, and that as far as he knew they remained unchanged.
AIG has been under investigation most recently by Mr. Spitzer and the SEC for non-traditional finite reinsurance transactions linked to Mr. Greenberg that are suspected of being used to improperly improve the insurance giant's financial outlook.
Alain Karaoglan, an analyst at Deutsche Bank Securities in New York said he believed the stock had rising because of the news of Mr. Greenberg's willingness to step aside. “People hope things are moving closer to a resolution of all the regulatory issues,” he said.