March 14 (Bloomberg) -- American International Group Inc.'s Maurice ``Hank'' Greenberg may step down as chief executive officer of the world's biggest insurer amid probes of potential earnings manipulation and bid-rigging, the Wall Street Journal reported, citing unidentified people familiar with the matter.
Greenberg, 79, probably will be replaced by co-Chief Operating Officer Martin Sullivan, 50, who has worked at New York- based AIG since 1971, the Journal reported earlier today. AIG spokesman Chris Winans declined to comment. Greenberg and Sullivan weren't immediately available for comment.
``With all the regulatory issues it's facing, anyone's tenure would be under threat,'' said Simon Clinch, who oversees about $1.3 billion of U.S. stock investments at Aberdeen Asset Management Plc in London, which owns about 300,000 AIG shares.
Greenberg built AIG since 1967 by making more than $50 billion of acquisitions to reach 50 million customers in 130 countries. His departure would come about five months after two AIG executives pleaded guilty to charges that they helped New York-based Marsh & McLennan Cos., the world's largest insurance broker, fabricate insurance quotes in order to steer unsuspecting clients to favored insurers.
Separately, AIG is being investigated in an industrywide inquiry of ``non-traditional'' policies that may help companies smooth their earnings and are often sold to other insurers as reinsurance.
AIG said in a statement last month that New York Attorney General Eliot Spitzer and the Securities and Exchange Commission sent subpoenas seeking information on such policies, as well as its accounting for reinsurance. AIG's Winans on March 7 said Spitzer personally directed one of the subpoenas to Greenberg.
Succession Issues
Shares of AIG are down 3.4 percent since Oct. 14 when Spitzer sued Marsh & McLennan and forced the company to remove CEO Jeffrey Greenberg, Greenberg's son. Shares of AIG were down 33 cents today at $64.38 in recent German trading.
Investors have wondered for years about who would replace Greenberg. His choice for successor had been unclear since his son Evan Greenberg left the company in 2000 without explanation.
``We have been waiting to find out for some time because of Greenberg's age,'' said Roman Cizdyn, an analyst at Oriel Securities Ltd. in London.
Acquisitions
Few companies are so strongly identified with a single man. Greenberg, who was paid $7.59 million in 2003, attained one of the property and casualty industry's highest profit margins by buying peers.
The successor to AIG founder Cornelius Starr, Greenberg took the company public in 1969 and has driven its market value to $168.5 billion. Today, no insurer is bigger by market value, and only Citigroup Inc. and Bank of America Corp. are larger financial services firms.
Greenberg increased AIG's net income by at least 15 percent in eight of the past 10 years, according to data compiled by Bloomberg. In 2003, the company spent 93 percent of every premium dollar on claims and expenses -- the third-best ratio among the 12 property and casualty insurers on the S&P 500 Insurance Index, Bloomberg data shows.
Greenberg bought rivals such as U.S. life insurer American General Corp. for $23 billion in 2001. When prices on property and casualty insurance as much as doubled following the September 2001 terrorist attacks in the U.S., he used the company's AAA credit rating to justify charging more than competitors. As price increases started slowing in 2003, he bought General Electric Co.'s Japanese life insurance business to further diversify.
``I'm thinking about the business all the time, it's not something I can start and stop,'' Greenberg said in an interview in September 2004. ``You have to have passion for what you do. If it's a chore, if you want to shut yourself off from what you do, then you're doing the wrong thing.''
Back to 1960
Greenberg joined AIG in 1960 after working at Continental Casualty Co. By 1962, Starr, who died six years later, had chosen him to fix American Home Assurance Co., an earlier acquisition with an unwieldy agency structure, according to AIG's corporate history.
In the 1970s, Greenberg added units to specialize in products such as kidnap and ransom insurance and corporate board liability coverage, establishing AIG as an insurer willing to cover almost anything at the right price. By the mid-1980s, AIG was the largest commercial insurer in the U.S.
Greenberg, who expanded the company in Japan, Eastern Europe and Africa, also returned AIG to China -- a country he has said may become one of the company's biggest markets.
Starr, a wanderlust World War I veteran, founded the company in Shanghai in 1919. AIG left when the Communist takeover advanced in 1950. In 1992, Greenberg won the company the first foreign insurance license there in 40 years, according to AIG's corporate history.
War Veteran
Greenberg, whose father owned a candy store, was born in New York City and nicknamed after Major League Baseball Hall of Famer Hank Greenberg.
He fought in World War II and Korea before becoming an insurance executive. At the age of 19, he stormed Omaha Beach during the D-Day invasion. In Korea, Greenberg earned a Bronze Star and rose to the level of captain.
Between the wars, Greenberg earned a pre-law certificate from the University of Miami and an LL.B. from New York Law School.
In his more than four decades at AIG, Greenberg built the company's property and casualty business with acquisitions such as National Union Fire Insurance Co., United Guaranty Corp. and HSB Group Inc., and expanded into non-insurance businesses such airplane leasing with the purchase of International Lease Finance Corp. in 1990.
Lobbying Efforts
More recently, he focused on life insurance and annuities, buying SunAmerica Inc. in 1999 for $19.7 billion and then American General in 2001.
``He only works about 16 hours a day,'' said Warren Buffett, chairman of rival Berkshire Hathaway Inc., in 2001. ``For as big as AIG is, he knows when a sparrow falls, even when a sparrow is thinking of falling.''
Greenberg also used his clout in Washington, helping to get a bill to limit class-action lawsuits approved and lobbying to cap insurers' costs from cancer-causing asbestos. At a Boston College event in February 2004, he called the plaintiffs' bar ``terrorists.''
The shift in power comes as AIG's share price heads into its fourth year at about 2.5 times book value. The stock was as high as 5.5 times book value in 2000 -- more than double the average for peers on the Standard & Poor's 500 Insurance Index.
In 2001, profit fell because of losses from the September terrorist attacks in New York and Washington. In 2002, net income rose just 2.9 percent as AIG increased reserves to pay claims on policies sold too cheaply in the 1990s.
