AIG: CEO Liddy's Exit Strategy
Even as he battles public furor over bonuses, American International Group (AIG) chief Edward M. Liddy is finalizing a plan to pay down a sizable chunk of his $180 billion tab with taxpayers. Now that attempts to sell assets to rivals have failed, Liddy is pursuing a new strategy. But his game plan for keeping AIG alive would integrate the government even more closely into the outfit's operations—something critics say will hurt the company. And AIG's CEO is already hinting that he won't be around to see a rescue through to its end.
In an interview on Mar. 19, Liddy discussed his plan to put a clutch of assets, chiefly from Asia-based American International Assurance (AIA) and American Life Insurance (ALICO), into a trust to be controlled by the Federal Reserve Bank of New York. While AIG would run the units, which had combined sales of nearly $30 billion last year, the move would shift some $34.5 billion of AIG debt to the Fed in exchange for giving it preferred shares. "It's an effective way of disaggregating AIG," says Liddy, adding that the Fed can sell the units or take them public as markets improve. Backing the move in testimony to Congress on Mar. 24, New York Fed chief William C. Dudley said: "Although it will take time, we still expect that the proceeds from asset sales should enable AIG to repay the New York Fed in full."
But there are risks. With each passing day in public-sector hands, AIG's assets may lose value as both staff and clients move to rivals. "Imagine if you're an insurance buyer at a company, and you go to your CFO and say you just bought an AIG program as he's watching CNN," says a big industry broker. "They're just getting beaten down." In a nod to how far its brand has fallen, the company recently removed the AIG name from its New York headquarters.
More important to AIG's future, perhaps, is the fact that Liddy himself seems increasingly disinclined to stick around. The former Allstate CEO, 63, says he plans to stay until he feels he has gotten AIG "moving in the right direction," which includes paying down the government debt and some of the TARP money put into the company. But he pointedly tells BusinessWeek: "This is not a life job for me."