AIG's Liddy: 70% Of Company Must Be Sold To Pay Fed Loan

BY MARK E. RUQUET
National Underwriter News
December 22, 2008


Seventy percent of American International Group must be sold in order for the company to repay its loan, its chief executive said today.

In an interview today on CNBC's "Squawk Box," AIG Chairman and Chief Executive Officer Edward Liddy said, "We're the only company that's been helped by the federal government that has a plan to pay back every single penny that has either been loaned to us or invested in us. To do that we have to sell 70 percent of our company; about 75,000 of our employees will end up working for someone else."

The remarks came in response to a dust-up over AIG's payments of retention bonuses to employees, which have ranged from a few thousand to millions of dollars.

Mr. Liddy has come under criticism for the payments from members of Congress, most vocally Democratic Maryland Congressman Elijah Cummings. Last week he accused the CEO of trying to disavow the payments while making them. The congressman was particularly upset with a letter he said he received from Mr. Liddy claiming less than 200 people would receive the bonuses when in fact the figure would be closer to 2,000.

Mr. Liddy said retention bonuses are necessary to keep valuable people in their positions because without them the companies AIG plans to sell would be worthless.

"If you don't use retention bonuses, those people are some of the best in the insurance industry," he said. "They will go elsewhere and we won't have anything to sell or we won't get the kind of value that we need."

He said the company is being inundated with requests for information from Congress and that it is very difficult to keep up with all the requests. Mr. Liddy said officials plan to sit down with Mr. Cummings after the first of the year and discuss his concerns. He added that the company has been very transparent, revealing all its moves in press releases and government filings.

When asked about paying back the money loaned to AIG, Mr. Liddy said he hoped it could be done in 2009. AIG has been stabilized, he continued, and the company is in phase two to pay back the assets and pay the loan.

"We are going to be one of the company's that distinguishes itself," Mr. Liddy said. "One hundred and sixteen thousand people at AIG did not cause this problem. They are going to solve the problem and sell our assets. We're going to pay back the assets. That's our goal."

One of the show's hosts, Joe Kernen, said federal intervention is not allowing Mr. Liddy to run the company as he sees fit and that the lesson to be learned is not to allow the government to intervene in running private business.

Mr. Liddy responded, saying that is why it was important for the company to pay back the loan quickly. He noted that moves the company has made, such as not running seminars at posh resorts for independent agents, will only undermine its marketing position.

"Over time that will hurt you," Mr. Liddy said. "An independent agent can sell your product or someone else's."

He said there might come a time when executives will have to stand up to Congress to defend its marketing decisions, but for right now "the better part of valor, I think, would be to sell our good assets at good values and pay down that debt so we can get back to running our business the way we want to run it."

He said that loosening of the capital markets would make the company's challenge "a whole lot easier."

When asked if the company would need to borrow any more money, Mr. Liddy said that would depend on the direction in which the capital markets go.

"If they stay where they are or get better, we'll be fine," he said. "But if the capital markets and credit markets were to continue to deteriorate, its anybody's guess as to what would happen."

He added, "But I like where we are and I think we can get done what we set out to do."


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