Former AIG CEO Greenberg Seeks 'Alternatives' For Firm
American International Group shareholder and former chief executive Maurice "Hank" Greenberg said on Friday he was considering "strategic alternatives" for the world's largest insurer.
Greenberg, ousted by AIG's board in 2005 during an investigation into fraud by then New York attorney general Eliot Spitzer, said in a regulatory filing that he anticipated holding discussions with other shareholders and third parties that would "improve ... the value of their investment."
As of October, Greenberg owned or controlled through his companies more than 300 million shares of AIG, or nearly 12 percent, according to Reuters data.
Greenberg, who has extensive links with Chinese state-owned entities and government officials, said in the filing with the U.S. Securities and Exchange Commission that he and parties involved with him had not yet made any decisions regarding their intentions. The filing named Edward Matthews, a former executive of AIG, and Starr International and C.V. Starr & Co., both of which are controlled by Greenberg.
AIG's shares rose 4.4 percent to $61.77 in after-hours trade after closing at $59.12 on the New York Stock Exchange.
Analysts said Greenberg's efforts could lead to him having a major affect on AIG's future.
"He's a major shareholder, and he has a significant amount of influence, although well short of control," said Donald Light, an analyst at Celent LLC.
Light said Greenberg, 82, could be looking to sell off AIG's non-insurance activities, such as its financial services division, where the company has much of its exposure to securities backed by subprime mortgages that are now a big concern to shareholders.
"It could also be viewed as a way for Greenberg to reassert control over the corporation that he built and was forced out of," said Light.
Light said it was unlikely that Greenberg could take over AIG, which has a market capitalization of more than $150 billion. But he noted that Greenberg has close connections with major Chinese firms.
In addition to insurance, AIG provides asset management and financial services.
Jeff Auxier of Auxier Asset Management, who owns AIG shares, said the company should spin off non-core businesses.
"They are in too many things and there are no synergies," he said. "I would give Greenberg full control of AIG's international operations and spinoff everything else."
Hedge Fund Manager: 'Tremendous Concern' AIG Is Adrift
One hedge fund manager who has been trimming a large position in AIG in recent months said Greenberg's pressure would be positive and may force the company to focus.
"There are tremendous concerns that AIG is adrift," said the hedge fund manager, who requested anonymity. "Generally people view this company as one with a great set of assets but is rudderless."
AIG spokesman Chris Winans said in an interview late on Friday, "AIG has made tremendous progress over the past two and a half years and has established a strong culture of good corporate governance."
"The company is pursuing the right strategies and the board and management are united in their commitment to building shareholder value," Winans said.
Greenberg spokesman Richard Schwartz declined to comment on the filing.
Greenberg is facing civil fraud charges brought by New York state. He is charged with misleading investors about AIG's finances by using sham reinsurance contracts and other transactions to hide losses when he headed AIG, a post he held for more than 30 years.
Greenberg has been a frequent visitor to China. Under his leadership, AIG was the first foreign insurance company to obtain its own license to operate in China.
In March, Greenberg launched a private equity joint venture with leading Chinese securities house CITIC Securities targeting the financial services, healthcare, environment, and real estate sectors.
In September, his private equity firm Starr International signed a deal to be a strategic partner in a Chinese infrastructure company in the northern Chinese city of Tianjin.
There were media reports in September that Greenberg was subpoenaed by the SEC and that he would give a deposition to the agency. He previously declined to answer questions from investigators, citing his rights under the Fifth Amendment to the U.S. Constitution, which prohibits giving testimony that could incriminate oneself.
In February, 2006, AIG paid $1.6 billion in fines and penalties to settle charges of big rigging and securities fraud with regulators.
Greenberg's filing with the SEC comes at a time when AIG is trading near its 52-week low because of investor fears about its exposure to securities backed by subprime mortgages.