Sept. 16 (Bloomberg) -- American International Group Inc. investors led by former Chief Executive Officer Maurice ``Hank'' Greenberg may consider taking control of the insurer through a proxy fight or buyout.

The investors also are considering acquiring New York-based AIG's subsidiaries or making loans to the company, Greenberg said today in a regulatory filing. AIG, the largest U.S. insurer by assets, declined more than 90 percent this year, prompting the action, he said.

``AIG was his baby -- they took it away from him, and he's been trying to find a way to get it back,'' said Phillip Phan, professor of management at the Johns Hopkins Carey Business School in Baltimore. ``This is the perfect opportunity.''

Greenberg, who retired under pressure from regulators in 2005, may be trying to regain control of AIG amid the insurer's struggle to survive a liquidity squeeze sparked by credit-rating downgrades. Greenberg controls the largest stake in AIG, about 11 percent, through investment firms and personal holdings, and saw the holdings plunge by more than $16 billion this year.

AIG declined $1.02, or 21 percent, to $3.74 at 2:47 p.m., paring losses from earlier in the day. Glen Rochkind, a spokesman for Greenberg, declined to comment and Nicholas Ashooh, AIG spokesman, didn't return calls seeking comment.

S&P lowered AIG's long-term counterparty rating three grades to A- yesterday because of losses tied to home loans and concerns whether the insurer can raise enough money to meet obligations to investors who purchased credit-default swaps from the company.

Credit Downgrade

The downgrade of AIG is the latest tremor to shake the global financial industry, less than a day after Lehman Brothers Holdings Inc. filed for Chapter 11 bankruptcy protection and Merrill Lynch & Co. sold itself to Bank of America Corp. for about $50 billion. Stock markets from Tokyo to London tumbled as investors weighed the impact of a potential collapse of the largest U.S. insurer by assets.

Wall Street's largest firms were to meet at the New York Federal Reserve for a fifth day today, discussing AIG, said a spokesman for the New York Fed.

The company was given special permission to access $20 billion of capital in its subsidiaries to free liquidity, New York Governor David Paterson said yesterday. The insurer has one day to raise $75 billion to $80 billion, Paterson told CNBC today. The insurer may file bankruptcy tomorrow, the network said, citing unnamed people close to the company.

AIG piled up net losses totaling $18.5 billion in the past three quarters on writedowns tied to the collapse of the U.S. subprime mortgage market. The insurer has units that originate, guarantee and invest in home loans.

AIG may be overwhelmed by protection it sold investors on $441 billion of fixed-income investments, including $57.8 billion in securities tied to subprime mortgages. The credit-default swaps already forced $25 billion in writedowns over nine months.

The rating cuts may trigger more than $13 billion in collateral calls from debt investors who bought swaps, according to an Aug. 6 filing from New York-based AIG, intensifying pressure on CEO Robert Willumstad to raise cash.

The swaps provided profits when the housing market prospered ``for what has now turned out to be a much greater amount of risk than anybody anticipated,'' Willumstad, 63, said during an Aug. 7 conference call.

Perella Weinberg

The AIG investors are reviewing their options ``in light of current circumstances relating to'' the insurer, the filing said. The group is using Perella Weinberg Partners LP as an adviser.

Greenberg wasn't involved in the company's planning that started Sept. 12 and yesterday and has ``repeatedly offered'' to assist the firm, Rochkind said yesterday.

Greenberg ran AIG for 38 years until he was forced to retire in March 2005 amid state and federal probes into the company's accounting and sales practices.

He denies any wrongdoing in the case, which is still pending. Then-New York attorney General Eliot Spitzer dropped portions of the lawsuit in 2006 that included four other allegations tied to the investigation.

Greenberg began a campaign to share up the insurer's management in November, saying in a filing that he would meet other investors upset with AIG's performance. He was among investors, including Bill Miller of Legg Mason Inc., who urged the ouster of his predecessor CEO Martin Sullivan. Willumstad replaced Sullivan in June. David Neustadt, spokesman for the New York insurance department, didn't return calls for comment.

Greenberg runs C.V. Starr & Co. and Starr International Co., two closely held firms once linked to AIG, whose investments have included Chinese private equity and Russian real estate.

The son of a candy-store owner on Manhattan's Lower East Side, Greenberg stormed Omaha Beach when he was 19 during the 1944 D-Day invasion of France and earned a Bronze Star in Korea, eventually rising to the rank of captain.

He joined AIG in 1960, and by 1962, AIG's founder Cornelius Starr had chosen him to fix American Home Assurance Co., an acquisition with an unwieldy agency structure. Five years later, he was named CEO.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: September 16, 2008 15:00 EDT