AIG’s Benmosche: Government Could Be Out By End of Year
AIG Chairman and CEO Robert Benmosche has asked the board if he can stay on through 2013.
Benmosche acknowledged this request in an interview with CNBC’s Mary Thompson after Wednesday’s annual meeting. Benmosche has been battling cancer, and had agreed to stay to the end of this year. Now he’s ready to stay longer.
He told CNBC he feels good. “If I can have this strength and energy I’ve told the board I would like to have them consider me staying on beyond this year,” Benmosche said.
Benmosche also talked about the health of AIG. He laid out his goals for the company over the next year including having the government exit at a profit. Given the Treasury’s stake has been cut to 61 percent from 91 percent since last May Benmosche acknowledged it may take longer than seven months for the government to sell the rest of its holdings — but he pointed out a year ago people thought it would take much longer for the government to sell as much as it has, in just twelve months.
He also wants to derisk the balance sheet by selling assets like its AIA subsidiary in Asia. The company will likely sell its remaining shares in AIA in November after the lock up period has ended, Benmosche told shareholders at the annual meeting.
Getting rid of assets like AIA fits with Benmosche’s strategy of reducing volatility, he told CNBC. Dumping non-core assets such as Maiden Lane II and Maiden Lane III releases $6 billion that was tied up in an equity position that had to be marked to market, he said. In addition, AIG no longer has all the toxic mortgages that were in Maiden Lanes II and III, on its books.
The slimmed down balance sheet, improved liquidity, increased reserves and strong operating results could be the key to a ratings upgrade, Benmosche said, another one of the goals he wants to accomplish before the end of this year.
AIG has done a “wonderful job” of improving the company’s fundamentals, according to Benmosche. Part of that continuing transformation may require increasing spending, in particular on technology.
“People are complaining about our expense ratio — they say ‘AIG always had the best expense ratio’. Why? Because it was the lowest,” Benmosche said, “That may not be the best. In the last three, four, five years for sure, we underinvested in technology.”
The company is also ramping up its investments to improve returns. It has rebuilt some of its portfolio in subprime mortgage-backed securities. While this investment has raised eyebrows, Benmosche says these are not the risky assets that were created in 2006 and 2007. He has also tried to buy assets from European banks, but that has proved difficult.
-By CNBC's Mary Thompson and Margaret Popper
@MThompsonCNBC and @popperm