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Thursday, November 26, 
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AIG part deux?

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Published October 27, 2009 at 1:29 PM
Former American International Group Inc. (NYSE:AIG) CEO Maurice "Hank" Greenberg is taking the motto, "if at first you don't succeed, try, try again," to heart.  The New York Times says he has started to build another insurance company, called C.V. Starr & Co., that would compete with the bailed-out behemoth of a company that he built up. Apparently, he's even poaching employees to create an AIG part deux.

Wait a minute. C.V. Starr isn't exactly new. The company was founded in 1950, and according to its Web site, it "has produced approximately $2 billion annually in comprehensive insurance coverage among several specialty lines covering aviation, energy, marine, excess casualty and property, and excess stop loss insurance for employer-sponsored benefit plans."

However, it's still bad news for AIG, who needs to retain all the employees it can. These would be the employees the insurance company desperately needs to keep valuations up on the assets it's divesting, as well as the people who are unwinding the heap of derivatives that got AIG into trouble in the first place.

Of course, you really can't blame employees for wanting to leave AIG. Not only would they no longer have to bear the stigma of working for AIG, but they would probably get paid more if they left, now that the Treasury is slashing compensation at the firm. Footnoted outlines the agreement between AIG and the Treasury Department concerning compensation:

  • Cash compensation at AIG will decline by an average 91% from 2008 levels
  • Total compensation will decline by an average of 58% from 2008 levels
  • Employees of AIG Financial -- the unit at the center of the mess -- will only receive base salaries for the remainder of 2009 and those that pledged to return previously awarded retention bonuses must return them immediately. (I'm not quite sure how this will work, but it's in the letter. Will federal Marshalls come a-knocking?)
  • No tax gross-ups
Even though AIG redux appears to be built the same way Greenberg built up AIG, according to The New York Times article, it doesn't look like it owns a financial products division, which is what caused AIG to fail. Even if Greenberg's business falls apart, it is privately owned. Yes, that means Greenberg doesn't have to disclose any financial information. It also means if AIG part deux blows up, it won't be bailed out. - Maria Woehr 



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