Aug. 20 (Bloomberg) -- American International Group Inc. head Robert Benmosche, who halted the auction of an investment advisory unit, told employees he’ll rebuild businesses and won’t be rushed by the U.S. into selling assets at unfavorable prices.

“I don’t liquidate things, I build them,” Benmosche said during an Aug. 4 town hall-style meeting for employees, according to a recording obtained by Bloomberg. “When we get the fair value for those businesses, that’s when we’re going to sell them; it’s not going to be before.”

Benmosche, named chief executive officer this month, may diverge from the course set by predecessor Edward Liddy to repay loans within AIG’s $182.5 billion bailout. Liddy told staff his first week on the job last year that he planned to divest units before they lost value, and then delayed his plans as the credit crisis hobbled potential buyers’ ability to make bids.

The insurer has announced about $9.3 billion in asset sales since its September rescue and still owes more than $40 billion on a Federal Reserve credit line. After more than $100 billion in net losses since 2007, AIG posted a $1.82 billion second- quarter profit this month as investment results improved allowing Benmosche more time to sell assets, he said.

“We believe we will be able to pay back the government and we hope we will be able to do something for our shareholders as well,” Benmosche said today in a Bloomberg Television interview from Croatia, where he has a home.

Stock Surge

AIG surged $5.66, or 21 percent, to $32.30 at 4:15 p.m. in New York Stock Exchange composite trading. The company had plunged more than 90 percent in 12 months through yesterday.

Benmosche told employees that he “had the luxury to say to the government, I’m not going to rush to do this. I’m appalled at how much pressure has been put on all of you to just sell it no matter what, because the Fed wants out, or the Treasury wants out. If they want out in a hurry, they shouldn’t have come in in the first place.”

Meg Reilly, a spokeswoman for the Treasury, and Deborah Kilroe of the New York Federal Reserve didn’t immediately return calls seeking comment.

AIG, which operates in 130 countries and owns property- casualty and life insurance operations and a plane leasing unit, is “too big” and “too interconnected,” Benmosche told staff. He will evaluate all of AIG’s businesses over the next few weeks to decide which should be kept. Christina Pretto, an AIG spokeswoman, declined to comment on his remarks.

‘World’s Best’

“My first charge is to get the company to operate at the level it used to operate, being the world’s best,” he said in the interview on the Peljesac peninsula. “The fact is we owe the U.S. government a lot of money and we are not going to be able to pay it back just by our profits, so we will sell some of the company off but only at the right time at the right price.”

Benmosche also addressed employees of AIG’s Financial Products unit last week in a conference call in which he emphasized maximizing the value of assets they are unwinding over speed in exiting the trades, according to two other people familiar with the situation. The unit sold credit-default swaps blamed for AIG’s near collapse last year.

Benmosche told staff he was working to get Kenneth Feinberg, the Obama administration’s so-called special master for executive pay, to “buy into” a new compensation plan for all employees expected within months. Benmosche will get $7 million in salary and as much as $3.5 million a year in long- term incentive awards, AIG said.

‘Shoot the Lights Out’

“I want to make sure we all get paid competitively,” he said. “If you shoot the lights out in a given year, we should have enough flexibility to give you a big increase.”

Benmosche, who was CEO of MetLife Inc. for eight years, transformed that company into the largest publicly traded U.S. life insurer from a mutual owned by customers. He said in his address that MetLife’s market value is now several times larger than that of AIG.

“It’s time the people in Congress stopped talking about you as the problem, because you’re the solution,” he said. “It’s not your fault, it’s their fault, it’s the regulators’ fault.”

The Office of Thrift Supervision “fell short” in its oversight of AIG’s credit-default swaps, Scott Polakoff, a former acting director of the regulator told lawmakers at a hearing in March.

If AIG gets out from under government ownership, the company could eventually have a secondary stock offering or an issuance of convertible debt “to raise really good long-term capital,” Benmosche said.

‘A Real Beating’

“He’s trying to improve morale, which has taken a real beating,” said Phillip Phan, professor at the Johns Hopkins Carey Business School in Baltimore. Phan said Benmosche is telling staff, “Stick with us, we’re in it for the long haul.”

Benmosche told employees not to be immobilized by concern that they will upset regulators.

“My fear is that you’ll say, ‘I don’t know if Treasury wants it, I don’t know if the Fed wants it, I don’t know if the lawyers want it, I don’t know whatever,’” he said. “If you sit there every day not making the right decisions to take us to the next level, we’ll miss an opportunity.”

Before joining MetLife in 1995, Benmosche was an executive vice president at PaineWebber Inc. where he directed the merger with Kidder Peabody, AIG said. During his tenure at New York- based MetLife, the insurer paid more than $11 billion for Travelers Life & Annuity, which included operations in Europe, Asia and Latin America.

‘Independent Thinker’

“Bob is both an independent thinker and he’s a very good operator,” said Donald Marron, former CEO of PaineWebber while Benmosche worked there and current CEO of buyout firm Lightyear Capital LLC. “You have to create a profitable enterprise. The market will value a business on its earning power. It sounds like that’s exactly what he’s focused on.”

Unlike Liddy, who served for about 10 months and earned a $1 salary, Benmosche, 65, said he would remain AIG’s CEO until he finishes the task of rebuilding the insurer. “It’s not a question of, I’m here for a year, two years and then I’m going back to my retirement,” he said.

Liddy, 63, said in a September 2008 address to employees that “every day we don’t do something, it will hurt us.” He initially expected that AIG could repay its government loans early. In October, Liddy said AIG would divest most businesses excluding property-casualty insurance. He later reacted to the difficulty selling assets by saying AIG would directly hand over stakes in two of its biggest non-U.S. life insurance units to pay down the Fed credit line by about $25 billion.

Employee Defections

Liddy also bought AIG time, extending the term of the credit line to five years from two and winning a lower interest rate on their loans. The company lost more than 45 managers to competitors since the bailout as Liddy started to dismantle AIG.

Benmosche this week pulled the auction of the AIG Advisor Group, a network of 5,500 financial advisers, because it complemented the insurer’s retirement operations, said David Monfried, an AIG spokesman. AIG sells retirement products, including annuities, and said that sales had been hurt by publicity about its bailout.

The adviser group “has very strong long-term prospects and will support AIG in its drive for growth and sustained profitability,” Monfried said in an Aug. 18 interview.

AIG’s $182.5 billion bailout includes a $60 billion credit line, an investment of as much as $70 billion and $52.5 billion to buy mortgage-linked assets owned or backed by the insurer.

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Boris Cerni in Ljubljana, Slovenia, at bcerni@bloomberg.net

Last Updated: August 20, 2009 16:31 EDT