Mr. Risk

As photographers clicked away on a sunny October day, a smiling Hank Greenberg stood in the Kremlin savoring his latest triumph, the formation of the Russian-American Investment Bank. The deal capped more than a year of secret negotiations and, since June alone, five flights to Moscow in his sparkling-white Gulfstream IV. Now, the chairman of American International Group Inc. was cordially shaking hands with Russian President Boris N. Yeltsin, sealing the agreement. In keeping with Moscow's austere mood, Greenberg recalls, Yeltsin didn't even offer a toast. "We should have one," the Russian leader joked. "But we don't have any vodka here."

The new bank, a ground-breaking venture, joins Greenberg's insurance giant with a coalition of military-industrial power players led by Yeltsin's national security chief, Yuri Skokov. The new partnership plans to channel Western investment into the cash-starved Russian energy and real estate industries. "It's as good a group as any," says Greenberg. "It will be a bridge."

Someone else making that claim might be greeted with skepticism, or worse. But not Maurice Raymond Greenberg, the Catskills-bred farm boy-turned-billionaire. In his 24 years as CEO, Greenberg has successfully networked and dickered with democrats and commissars and made AIG a force to be reckoned with in 130 countries. The onetime enfant terrible of the insurance business is now 67, but he has yet to slow down, name a successor, or show any other sign of wanting to retire. "It hasn't crossed my mind yet," he says.

Hank Greenberg--long ago he acquired the nickname of the renowned Detroit Tigers slugger--is only the second man to run AIG since Cornelius Vander Starr, who once owned an ice-cream parlor in California, moved to Shanghai and, in 1919, began selling insurance to its citizens. As outspoken as Starr was retiring, Greenberg is a tightly wired-in boss who abhors surprises and, insiders say, often is in on the latest office gossip in Bangkok or Boston even before local managers catch wind of it. Demanding, profane, and often intimidating, he's now moving at a more breakneck clip than ever.

SWAP SHOP. AIG has a lot more going than just Russian deals. Greenberg is fundamentally remaking the creature he helped create. Just as he once pushed, pulled, and molded AIG into the nation's largest commercial property and casualty insurance group, Greenberg is now creating what Salomon Brothers Inc. analyst A. Michael Frinquelli calls "a global financial-services growth company." He's moving into everything from aircraft leasing to trading foreign currencies and interest-rate swaps--complex hedging instruments that permit financial institutions to exchange interest payments. Swaps are now one of the fastest-growing areas on world money markets.

Unlike many CEOs, who restructure only when times are tough and profits sagging, Greenberg, whose company has $83 billion in assets, is refashioning AIG from a position of strength. AIG is the most international of any of its competitors, with half its profits coming from lucrative franchises overseas. AIG, for example, dominates the life insurance business in many of Asia's fastest-growing economies, from Thailand to South Korea. In Japan, where it pioneered U.S.-style auto and life insurance in 1946, AIG remains the leading foreign insurer of any sort.

Greenberg's global reach and diversification push are giving AIG's earnings a boost just when many U.S. insurers have been battered by 1992's spate of disastrous weather. Although AIG, too, has been hit, suffering $150 million in property-damage claims from Typhoon Omar and Hurricanes Andrew and Iniki, it has been shielded by the cash its life-insurance and finance arms continue to churn out.

Financial services alone accounted for 22% of AIG's pretax profits in the third quarter, up from next to nothing only a few years ago. That's one reason why analysts estimate AIG may still earn a record $1.6 billion in 1992, on revenues of about $18 billion, despite the storms (charts). Such expectations are keeping AIG's shares in the stratosphere. They have soared recently to an all-time high of $114, a dizzying 3,740% climb since Greenberg took the company public in 1969.

URBAN GUERRILLA. Greenberg's quest for diversification has taken AIG into a flurry of deals. In 1990, he shelled out $1.26 billion in cash and stock to buy the world's premier aircraft-leasing group, International Lease Finance Corp.. Greenberg is moving into new insurance ventures, too. Take consumer auto coverage in the U.S. A huge market, it has never been a major AIG line. Then, earlier this year, Greenberg spent $27 million for 20% of the Robert Plan Corp., a gutsy Lynbrook (N.Y.) auto insurer that uses sophisticated computer data bases and dogged attacks on scam artists to rack up high profits in inner cities.

An even bigger move in life insurance could also be in the offing. Last year, Greenberg took a stab at expanding his modest U.S. life business by studying a possible takeover of the then-troubled Equitable Cos., which later was sold to France's Groupe Axa for $1 billion. With the U.S. accounting for 40% of the world's life insurance business, Greenberg has continued to sniff around, examining Mutual Life Insurance Co. of New York, the failed Mutual Benefit Life Insurance Co., and others.

These excursions are a sharp departure from AIG's core property and casualty business, which Greenberg built up in typically unconventional fashion. Greenberg has earned a global reputation as a one-man Lloyd's of London who will, says analyst Frinquelli, "take on some of the grungiest risks around." Whether it's kidnap insurance for a multinational manufacturer's CEO, liability coverage for a trash dump in Ohio, or a policy on a high-tension power pylon or an oil rig in the North Sea, Greenberg always seems to be on the spot with a custom-tailored solution. Says Paul K. Sprague, the U.S. insurance director for Swiss chemical and pharmaceutical maker Ciba-Geigy Ltd.: "AIG is one of the few groups you can go to and say, `Let's cut a deal.' "

PUT-DOWNS. This is the key to AIG's enviable ability to make money. In targeting high-risk markets, often in high-risk areas of the world other insurers shy away from, Greenberg is able to collect lucrative premiums. Also crucial to AIG's bottom line is Greenberg's obsessive attention to costs. The company's expense ratio--the amount of every premium dollar consumed by overhead--is a mere 21%, five points below the U.S. industry average. That gives Greenberg the leeway to undercut less efficient competitors and still earn a hefty profit.

Such deep-pocketed competitors as America's Chubb and CIGNA, Switzerland's Zurich Insurance, and Germany's Allianz assiduously attempt to emulate AIG's formula. But Greenberg, whose put-downs of colleagues, competitors, regulators, and even customers have become an industry legend, remains unimpressed. "Chubb?" he says. "They don't break down their foreign earnings because they don't have any. They all want to do what we're doing. But no other underwriter in the world comes remotely close."

Then why is Greenberg so anxious to move AIG beyond writing property and casualty business? Long a highly cyclical field, commercial insurance is now under pressure from price-cutting, soaring health-care and workers' compensation outlays, and, potentially, hundreds of billions of dollars' worth of claims to pay for the cleanup of hazardous waste sites. Says Greenberg with a shrug: "You've got to evolve."

In entering new markets, however, Greenberg may be facing risks as exotic as any he has confronted in the 30 years since he left a fast-track career at Continental Casualty Corp. to start an overseas health and accident business for the then-tiny AIG. But he may have little choice if AIG is to continue growing.

Can Greenberg hack it? He is acknowledged worldwide as one of the sharpest insurance underwriters around. But will he be as successful handling the massive credit exposures created by his financial-services ventures?

That isn't the only long-term risk AIG faces. There's Greenberg's I-am-the-law management style. "There's only one royal highness around here," says Thomas R. Tizzio, AIG's president and property and casualty chief. Will that continue to serve AIG well as the company's assets close in on $100 billion and Greenberg pushes 70?

Lean and fit from daily workouts on his exercise bike and stair-climber, Greenberg seems preoccupied with the present--and staying at least two steps ahead of the pack. "We don't wait until the bridge is built and have a couple of tanks go across," he says. "We want to be the bridge-builders." Indeed, Greenberg keeps underlings at his--and his customers'--constant beck and call. "If I want to call somebody at Liberty Mutual, I've got to get him by 4:45 in the afternoon," says Eugene R. Anderson, a New York insurance lawyer. "But if I want to reach someone at AIG, I can call him at 11:45 at night."

A Type A workaholic, Greenberg sets the same pace for himself. Says Sidney Cohen, a classmate of Greenberg's at New York Law School and now an attorney for AIG: "He works 24, maybe 36 hours a day, and he loves it."

Nowhere is that more apparent than in Greenberg's travel schedule. Take this fall. In between trips to Moscow, Greenberg made it to Capitol Hill to lobby Senator Sam Nunn (D-Ga.) on rewriting product-liability laws and jetted to Shanghai in "my flying office" just in time to see AIG be granted permission to sell business and personal insurance to the 13 million citizens ofthe booming metropolis. Greenberg's chief ally in China: Zhu Rongji, the former mayor of Shanghai and a powerful member of the Politburo who functions as the nation's economic czar.

Something of a coup in itself, the decision returned AIG to its Shanghai roots and made it the first foreign insurer allowed back into China since it left a year after the Communist Party takeover in 1949. Days after winning its license, AIG had already written its first policy, a marine insurance one. It's now preparing to hire and train hundreds of local agents to sell life insurance. "They're poised to eat up the market," says Michael C. Kwee, an AIG alumnus and president of Hong Kong-based Prudential Asset Management Asia Ltd.

LONG SHOTS. Washington, Moscow, and Beijing weren't Greenberg's only stops. There was time out for the occasional power breakfast or senior management meeting in his 18th-floor office suite lined with photos of himself with world leaders. Then the chairman headed off to Manila along with 50 high-level U.S. business executives for meetings on trade with President Fidel Ramos and much of the Philippines' political and business elite. A staunch Republican and free-trader, Greenberg was also among the U.S. executives on President Bush's trade mission to Asia last winter.

Such peregrinations often lead him into taking long-shot bets. For example, years of insurance deals with the former Soviet Union--and Greenberg's connections as the current deputy chairman of the Federal Reserve Bank of New York--helped pave the way for AIG's Moscow investment bank and another new venture that aims to sell insurance to Russian entrepreneurs. And nearly two decades of joint ventures, real-estate investment, and dogged personal lobbying in Beijing and Shanghai by Greenberg and Henry A. Kissinger, Greenberg's close friend and No. 1 global troubleshooter, helped open the door for AIG's return to China.

Greenberg is currently negotiating to resume writing life insurance in Pakistan, where AIG's life unit was nationalized in the 1970s, and lately has even dispatched staffers, traveling as tourists, to check out the chances of returning to Vietnam. That go-get-'em spirit seems to have pervaded even the most humble reaches of Greenberg's realm. Boasts one AIG executive: "We'll even send a dugout canoe up a river in the Philippines to sell a life-insurance policy."

OMAHA BEACH. Intense energy and an appetite for risk have been Greenberg's hallmarks ever since his youth on a farm in the upstate New York village of Swan Lake. At 17, Greenberg ran away from home, lied about his age to get into the Army, and ended up as a Ranger, taking part in the Allies' landing on Omaha Beach. Back home after the war, he attended the University of Miami and New York Law School, only to be recalled to Korea. Pressed into service as a defense attorney in court-martials of GIs accused of smuggling and other petty offenses, he immediately won his commanders' ire by winning a string ofacquittals.

After moving on to combat duty on the front, Greenberg returned to New York. Without a job and with his wife, college sweetheart Corinne, and the first of their four children to feed, the young lawyer began knocking on doors along William Street, the heart of New York's insurance district. Rebuffed by an officious personnel man at Continental Casualty, Greenberg recalls, he searched out the man's boss and chewed him out for the assistant's behavior. "I left with a job," Greenberg smiles. "That's how I got into insurance. It was great career planning."

"He's got a low tolerance for people who are incompetent," says retired Army Brig. Gen. John E. Murray, a Korean War buddy of Greenberg's. "He doesn't mince any words, and a lot of them are four-letter ones."

MAJOR MOVES. Greenberg showed his proclivity for shaking things up in his early days at AIG when he was put in charge of American Home, a dog-eared division struggling to market personal and small-business policies. Soon after taking over the unit, Greenberg dumped its entire business and repositioned it as a provider of multimillion-dollar insurance lines to big corporations. As a reward for the turnaround, Starr handpicked Greenberg as his successor a few months before his death in 1969, leapfrogging him over two more senior rivals.

Over the past year, Greenberg has ordered his money-losing New Hampshire Insurance Group to withdraw from writing consumer policies. He is now turning it into an outlet selling megacorporation-style coverage tailored for midsize businesses. He has also scaled back coverage for workers' compensation and commercial trucking.

But these activities are chip shots compared to his major new ventures in financial services. The moves were made possible by AIG's AAA credit rating, its dearth of bad real-estate loans, and a portfolio of high-quality government and corporate bonds that is worth about $1 billion more than its $26.2 billion book value. Greenberg's corps of dealers, schooled at Drexel Burnham Lambert Inc., Goldman, Sachs & Co., and other houses, are now trading up a storm in bullion, foreign exchange, and swaps. Greenberg's traders specialize in using the company's high credit rating as the security for unusual transactions that can stretch out for 10, 20, or even 30 years--ones that risk-averse banks generally shun.

Since ex-Drexel dealmaker Howard B. Sosin set up the 80%-owned AIG Financial Products Corp. in partnership with Greenberg in 1987, for example, the insurer has built up $89 billion in swaps, many of them with lower-rated states and municipalities. Take the Los Angeles County Transportation Commission. It recently concluded a swap deal with Sosin's group that protects the body against interest-rate swings on $98 million worth of floating-rate notes. In effect, AIG Financial Products took over the commission's obligation to pay a floating rate of interest to investors for the next 20 years. In return, the commission locked in its financing costs by agreeing to pay the unit a fixed rate for the entire period. Despite AIG's fees, the transaction still saved the commission nearly half a percentage point over what it would have had to pay by issuing fixed-rate debt on its own.

Such activities generated $105 million in pretax profits for AIG last year and, according to banking sources, brought Sosin an estimated $3 million to $5 million in compensation. Sosin, through a spokesman, declined to comment. But high compensation for high achievement is a way of life around AIG.

Greenberg earned $1.95 million last year, and he now controls 2.2% of AIG's shares, worth a cool $520 million. On their own and through two private hoding companies, Greenberg and a small band of other top AIG managers and alumni own another 29% of the company's stock. Greenberg's interests in these holding companies alone may be worth an additional $500 million or more. "What makes AIG unique is the ownership by top management and insiders," says Smith Barney, Harris Upham & Co. analyst Ronald W. Frank. "You want to have a management that eats its own cooking. These guys assuredly do."

With such a major stake in AIG, it's thus no wonder that Greenberg, a dedicated pennypincher who favors a plastic Casio runner's watch over the typical CEO's gold Rolex, keeps an eye on AIG's coffers as if they were his own. But in addition to being a ruthless cost-cutter, Greenberg has gained a reputation as the Street's sharpest bargainer.

Many big insurance customers and brokers contend that prying cash out of AIG can be an excruciatingly difficult affair, often solved only after a tough legal battle over the many delicate nuances in its complex policies. Attorney Anderson, who has opposed AIG in many cases, recalls that "when I give after-dinner speeches, I say that every speaker tells a joke. I'm going to tell you one now. Greenberg paid a claim."

Greenberg bristles: "That's a bad rap. You're always going to find you haven't made someone happy." Noting that many such disputes stem from a long-running battle between insurers and customers over coverage of years-old environmental claims stemming from the federal Superfund cleanup program, he insists that "we'll pay every fair claim, and will resist every claim we shouldn't pay."

Nonetheless, some major customers remain unimpressed. FMC Corp., for instance, is currently suing AIG, Liberty Mutual, and 163 other insurers in California to determine whether policies sold as far back as the 1940s will pay to clean up 79 identified hazardous waste sites nationwide. Much of the case hinges on technicalities, including the changing legal definition of such terms as "sudden and accidental" damages. While AIG, which has played a leading role in the defense, lost a round in the state Supreme Court last year, it is continuing to slug it out. "FMC bought comprehensive general-liability coverage over the years," says Bowen H. Tucker, FMC's senior litigation counsel. "We're just trying to get the insurance that we think we paid for."

Greenberg worries a good deal about the long-term threat to AIG and other insurers from Superfund claims and natural disasters, such as an earthquake even more massive than the recent one that laid waste to parts of San Francisco and Oakland. Greenberg contends that such a catastrophe could wipe out much of the U.S. insurance industry's ready cash and cause a crash in the bond marketas insurers madly sell assets to raise more funds. To stave off such a financial calamity, he proposes a Federal Deposit Insurance Corp.-type body to cover insurance-company failures. He also advocates a no-fault hazardous waste cleanup system, financed by a 2% federal tax on business insurance premiums, to supplant the government's Superfund program.

OPEN NEPOTISM. A much more tangible risk to AIG, though, is the apparent lack of a successor to Greenberg. His strong advocacy of turning even modest-size product lines into discrete profit centers has built up a cadre of bottom-line oriented, thirtysomething managers. But in AIG's upper reaches, many of Greenberg's closest advisers are themselves in their 70s and up. And while Wall Streeters admire Tizzio, 54, and Vice-Chairman Edward E. Matthews, 61, the group's CFO, most observers still believe Greenberg is keeping his chair warm for his eldest son, Jeffrey, 41.

Regarded as a talented insurance man in his own right, Jeff, whom his dad promoted in 1991 to head AIG's influential domestic brokerage unit, nonetheless raised a ruckus in Florida and Louisiana last September by urging executives to press for rate hikes in Hurricane Andrew's wake. Through a spokesman, Jeff Greenberg declines to comment. His father is equally reticent on disclosing who might eventually follow him as CEO, saying: "We have several vice-chairmen. If I take the wrong bus, someone will succeed me. Will I disclose who it is? No." But at least two top managers, life-insurance boss George A. Abouzeid and Joseph P. DeAlessandro, now Primerica Corp.'s insurance chief, are said to have quit in recent years after tiring of waiting for Greenberg to consider them for his job. "It got to the point where I was 58 and Hank 61," says Abouzeid. "I felt that even if I had a shot at his seat, it should be someone in his mid-40s. There was no point hanging around."

Perhaps reflecting its Chinese roots, AIG places a high value on family ties. Sons and nephews of Starr's original colleagues continue to hold key positions, and two other Greenberg sons, Evan, 37, and Scott, 34, are also AIG managers. Nonetheless, it's clear who's the boss. Over the past 24 years, Hank Greenberg has piloted AIG through plenty of uncharted waters. At 67, he's hardly done with the job.

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