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CNBC TRANSCRIPT: CNBC EXCLUSIVE: CNBC'S "THE STRATEGY SESSION" TALKS WITH MAURICE "HANK" GREENBERG, CHAIRMAN AND CEO OF C.V. STARR & CO AND FORMER HEAD OF AIG

WHEN: THURSDAY, MAY 26, 2011

WHERE: CNBC'S "THE STRATEGY SESSION" AT 12PM ET

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Maurice "Hank Greenberg, Chairman & CEO of C.V. Starr & Co and Former Head of AIG, today on CNBC's "The Strategy Session."

The full interview is also available at: http://video.cnbc.com/gallery/?video=3000023689

All references must be sourced to CNBC.

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FABER: BUT I WANT TO TURN NOW TO AIG. A COMPANY THAT WE HAVE DEALT WITH MANY, MANY TIMES DURING THE YEAR THAT WE'VE BEEN DOING THIS SHOW. THE SHARES HAVE STABILIZED TODAY AFTER THE GOVERNMENT UNLOADED PART OF WHAT IS STILL A HUGE STAKE IN THE COMPANY. AIG ACTUALLY HAS BEEN THE WORST PERFORMING STOCK IN THE S&P THIS YEAR.OF COURSE, IT WAS ONE OF THE BEST PERFORMERS LAST YEAR. BUT THAT PERFORMANCE WELL IS PROBABLY NOT GOING TO MAKE OUR NEXT GUEST THAT HAPPY.HANK GREENBERGS THE CHAIRMAN OF CV STARR. HE RAN AIG FROM 1968 UNTIL 2005. DURING THAT TIME CONSIDERED A CORE HOLDING FOR MANY INVESTORS, REMAINS ONE OF THE LARGEST INDIVIDUAL SHAREHOLDERS IN THE COMPANY.THIS IS THE FIRST INTERVIEW SINCE THE RE-IPO. AND AS USUAL, YOU'RE JUST GETTING OFF A PLANE BACK FROM CHINA, AS YOU SO OFTEN DO. NICE TO HAVE YOU HERE.

HANK GREENBERG: GOOD TO BE HERE, DAVID.

FABER: GIVE ME YOUR REACTION TO THE INITIAL STOCK SALE THAT WE SAW FROM THE U.S. GOVERNMENT TAKING ITS STAKE DOWN TO, I BELIEVE, 72% NOW FROM WHAT HAD BEEN MUCH LARGER.

GREENBERG: I THINK IT'S 77% IS IT?

FABER: IS IT 77? YOU WOULD KNOW BETTER THAN I. SELLING ABOUT 200 MILLION SHARES, THE COMPANY SELLING ANOTHER 100 MILLION.WHAT DO YOU THINK?

GREENBERG: THE GOVERNMENT STILL OWNS 79% OF THE COMPANY.IT'S A BIG OVERHANG. AND IT'S GOING TO TAKE A LONG TIME TO GET OUT OF IT. AND THE PRICE WAS SOMEWHAT LESS THAN THEY EXPECTED.

FABER: ARE YOU DISAPPOINTED AT THE PERFORMANCE OF THE STOCK PRICE THIS YEAR? OBVIOUSLY LAST YEAR, A VERY DIFFERENT STORY FOR AIG. BEN MOSCHE DOES SEEM TO HAVE STABILIZED THE OPERATIONS OF THIS COMPANY.

GREENBERG: WELL, LOOK, IT'S NOT THE SAME COMPANY, DAVID. MANY OF THE BETTER ASSETS HAVE BEEN SOLD.LIFE INSURANCE BUSINESS INTERNATIONALLY HAS BEEN SOLD. THAT WAS A CROWN JEWEL. SO YOU'VE GOT A DIFFERENT COMPANY.IT'S A PROPERTY CASUALTY COMPANY. DOMESTIC LIFE COMPANY. AND REALLY SOME ODDS AND ENDS. THAT'S IT. IT OWNS ILFC A GOOD AIRLINE LEASING COMPANY.

FABER: THERE HAD BEEN SOME THOUGHT ALONG THE WAY THAT ULTIMATELY THAT MIGHT NEED TO BE SOLD, BUT THAT HAS NOT HAPPENED.

GREENBERG: BUT THE PROPERTY CASUALTY BUSINESS IS VERY COMPETITIVE. A LOT OF CATASTROPHES THIS YEAR. RATES ARE STILL, AT BEST STABLE. THEY SHOULD BE GOING UP. THE EXPENSE RATIO OF THE COMPANY IS TEN POINTS HIGHER WHEN I LEFT THE COMPANY. THAT'S ONLY $5 BILLION A YEAR.

FABER: IS THAT ALL THAT IS? YOU SAY THAT OBVIOUSLY, YEAH, $5 BILLION IS AN AWFUL LOT OF MONEY.

GREENBERG: YEAH.

FABER: OF COURSE, IT'S ALSO TRADING WELL BELOW BOOK VALUE. PERHAPS IN PART BECAUSE OF ONE OF THE THINGS YOU JUST CITED IN TERMS OF COST.

GREENBERG: THERE'S A LOT THAT HAS TO BE DONE. BENMOSCHE IS A GOOD MAN AND HAS DONE THE BEST HE CAN WITH WHAT HE HAD. THE REAL ISSUE IS DID THE GOVERNMENT NEED TO TAKE 92% OF THE COMPANY? WHEN AIG GOT AN $85 BILLION LOAN, A BRIDGE LOAN, INCIDENTALLY, AT 14.5%, AND THEY TOOK 79.5% OF THE EQUITY. I MEAN, ON WHAT BASIS?

FABER: YOU AND I HAVE DISCUSSED THAT BEHIND CLOSED DOORS TO A CERTAIN EXTENT. I KNOW YOU'VE ALSO PUBLICLY OBVIOUSLY SAID THAT DIDN'T NEED TO HAPPEN. BUT I THINK MANY PEOPLE WOULD LOOK AT WHAT HAS HAPPENED IN TERMS OF HISTORY AND SAY, WELL, THE GOVERNMENT SEEMS TO BE GETTING OUT WHOLE AT THIS POINT. AND WE DID MANAGE TO STABILIZE WHAT MANY PEOPLE BELIEVE WAS GOING TO BE A FINANCIAL SYSTEM THAT WOULD HAVE BEEN COMPLETELY SCREWED UP.

GREENBERG: DAVID, I RESPECTFULLY DISAGREE WITH WHAT THEY DID AND WHAT THEY COULD HAVE DONE.THEY COULD HAVE GIVEN AIG A BANK HOLDING COMPANY LICENSE. I GAVE IT TO THE HARTFORD INSURANCE COMPANY.THERE'S A LOT THEY COULD HAVE DONE. THIS WAS A NATIONAL ASSET. IT REALLY WAS. BUT WE GAVE AWAY LITERALLY THE INTERNATIONAL BUSINESS.IT MADE NO SENSE.

GARY KAMINSKY: YOU KNOW, HANK, DAVID MENTIONED IN THE INTRO, THIS WAS A CORE HOLDING.IN MY 20 YEARS MANAGING MONEY, AIG WAS ONE OF THOSE STOCKS PORTFOLIO MANAGERS BOUGHT, PUT AWAY AND JUST KEPT. IT WAS A GREAT GROWTH COMPANY.I ATTENDED MANY OF THE MEETINGS. I LISTENED TO YOU TALK ABOUT AS WE LOOK AT THAT CHART THERE, TALK ABOUT THE BUSINESS. IT WAS A PRETTY SIMPLE BUSINESS. INSURANCE IS A SIMPLE BUSINESS WHEN YOU MANAGE IT PROPERLY. SO A LOT OF PEOPLE DON'T REALLY KNOW EXACTLY WHAT HAPPENED.YOU KNOW, GIVE US A LITTLE HISTORY.WHEN DID AIG BECOME A DIFFERENT COMPANY FROM WHEN IT WAS A SIMPLE BUSINESS TO UNDERSTAND? AND IS IT NOW -- IS IT NOW BACK TO THAT SIMPLE BUSINESS THAT WAS PREDICTABLE AND EASY TO EARN, YOU KNOW, EASY TO EARN, GROW THAT BUSINESS WITH PREDICTABLE BUSINESS MODEL?

GREENBERG: LET ME ANSWER THAT. FIRST OF ALL, IT STARTED OFF AS A PROPERTY CASUALTY COMPANY, BUT PROPERTY CASUALTY BUSINESS IS VERY VOLATILE. AND SO DIVERSIFICATION WAS ESSENTIAL. WE ADDED LIFE INSURANCE TO IT.THEN OUR FOREIGN BUSINESS ADDED FURTHER DIVERSIFICATION BECAUSE WE WERE OF 130 COUNTRIES.THEY DON'T ALL GO BAD AT ONE TIME.AND AS WE WENT ALONG, WE WERE A AAA-RATED COMPANY. WE WANTED TO USE THAT AAA TO FURTHER GROWTH AND EARNINGS. WE GOT INTO FINANCIAL SERVICES. IT WAS THE RIGHT THING TO DO BECAUSE THERE WAS A LOT OF CROSS-SELLING THAT WENT ON. THAT'S HOW IT BECAME MORE THAN JUST AN INSURANCE COMPANY. IT WAS BOTH AN INSURANCE COMPANY AND OTHERS.

FABER: WERE YOU TAKING ON A LOT MORE RISK DURING THAT PERIOD, EVEN BEFORE YOU RETIRED AS CEO IN 2005 BUT ULTIMATELY CAME HOME TO ROOST?

GREENBERG: NO. THEY DID MORE CREDIT DEFAULT SWAPS AFTER WE LEFT THAN WE DID IN NINE MONTHS THAN WE DID IN SEVEN YEARS. WE HAD AN ENTERPRISE RISK MANAGEMENT SYSTEM COMPANYWIDE. WE KNEW WHAT RISK WAS, OBVIOUSLY. INSURANCE IS A RISK BUSINESS. SO, OF COURSE, WE UNDERSTOOD RISK.

KAMINSKY: YOU POINT OUT HOW YOU TOOK THE PROPERTY AND CAUSUALTY BUSINESS, YOU DIVERSIFIED GLOBALLY AND YOU DIVERSIFIED INTO LIFE INSURANCE TO SORT OF SMOOTH OUT THE GROWTH OVER TIME.SO NOW THEY DON'T HAVE THE LIFE INSURANCE BUSINESS.

GREENBERG: THEY DON'T HAVE ALL OF IT. THEY'VE SOLD THE INTERNATIONAL.

KAMINSKY: RIGHT, THE INTERNATIONAL LIFE INSURANCE BUSINESS. IS THIS COMPANY, AS IT STANDS TODAY, $28.84 A SHARE, DISCOUNT ON BOOK VALUE, IS THIS A CHEAP STOCK?ARE YOU BUYING MORE SHARES? DID YOU BUY MORE SHARES YESTERDAY IN THE OFFERING GIVEN WHAT YOU KNOW ABOUT THIS BUSINESS?

GREENBERG: I DIDN'T BUY MORE SHARES YESTERDAY.

FABER: AND DO YOU THINK IT'S A CHEAP STOCK? YOU KNOW, AGAIN, BACK TO THIS IDEA, NOBODY UNDERSTANDS THIS BUSINESS.WHAT'S LEFT OF IT. MAY IT BE THAT THE INTERNATIONAL ASSETS ARE NO LONGER APART OF IT, YOU STILL UNDERSTAND THIS BUSINESS VERY, VERY WELL. YOU THINK IT'S GOT EARNINGS POWER? HOW MUCH EXCESS CAPITAL CAN THIS COMPANY GENERATE?

GREENBERG: THAT WILL DEPEND UPON WHAT THE RESULTS ARE. IF THEY CAN MANAGE THE PROPERTY CASUALTY BUSINESS SUCCESSFULLY, THEN THE COMPANY OUGHT TO DO WELL. IF THEY DON'T, THE RESULTS WILL SPEAK FOR THEMSELVES.

FABER: YOU'VE STILL GOT A GOVERNMENT THAT OWNS, AS WE'VE SAID, MANY MILLIONS OF SHARES THAT WILL KEEP SELLING OVER TIME. IT DOES APPEAR THEY DONT WANT TO SELL ANYWHERE BELOW $28.70 WHICH IS BREAK EVEN. WHAT IS THAT DO TO THE INVESTMENT CONSTRUCT?

GREENBERG: LET ME CORRECT ONE THING. ON THE BREAK-EVEN STATEMENT. THEY ALSO GOT OVER $6 BILLION IN FEES AND INTEREST.

FABER: THAT IS TRUE.

GREENBERG: YOU KNOW, THAT'S PROFIT.

FABER: YES.THAT IS A GOOD POINT TO MAKE AS WELL ON THE BRIDGE LOAN AND OTHER THINGS ASSOCIATED WITH IT.BUT THAT'S AN OVERHANG THAT'S GOING TO BE THERE FOR QUITE SOME TIME.

GREENBERG: IT SURE IS. IT SURE IS. YOU KNOW, HOW DO YOU DO IT -- HOW DO YOU GET RID OF THE STOCK? THAT'S WHY I'VE SAID THAT IT WAS A MISTAKE FOR THEM TO HAVE TAKEN 79.5% OF THE COMPANY. IF THEY HAD NOT DONE THAT, IF THE GOVERNMENT OWNED UNDER 50% OF THE COMPANY, "A," THE STOCK WOULD BE AT A HIGHER PRICE AND THEY'D GET RID OF IT MUCH SOONER.WHO WANTS TO INVEST IN A GOVERNMENT-CONTROLLED AND OWNED COMPANY?

FABER: IN THE BRIEF TIME WE HAVE LEFT, I'D LOVE TO MOVE IT BACK TO CHINA WHERE YOU JUST SPENT THE LAST TWO WEEKS.YOU'RE STILL DOING DEALS THERE.I KNOW YOU HAVE, IN FACT, A NEW DEAL, I BELIEVE, TO INSURE, CORRECT?

GREENBERG: YES, SIR.

FABER: WHAT'S GOING ON?

GREENBERG: THIS IS A PROPERTY CASUALTY INSURER. ITS CALLED A DAZHUNG. IT'S A SHANGHAI-BASED COMPANY. OWNED PRINCIPALLY BY THE DIFFERENT ENTITIES OWNED BY SHANGHAI. WE'VE MADE A SIGNIFICANT INVESTMENT IN THE COMPANY.

FABER: YOU BEING CV STAR.

GREENBERG: YEAH. WE WILL APPOINT THE GENERAL MANAGER. THEY WILL APPOINT THE CHAIR. WE'LL HAVE SEATS ON THE BOARD. I'M QUITE EXCITED ABOUT THE POTENTIAL.

FABER: YOU KNOW, PERHAPS NOBODY KNOWS BETTER IN TERMS OF THE INTRICACIES OF WHAT GOES ON IN CHINA AND HOW CORPORATIONS ARE RUN THERE THAN YOU DO.THERE HAVE BEEN MANY REVERSE MERGERS HERE IN THE U.S. OF CHINESE COMPANIES AND MANY OTHER INITIAL PUBLIC OFFERINGS. WHAT DO YOU TELL INVESTORS OUT THERE GIVEN WHO MAY WONDER ABOUT TRANSPARENCY, ABOUT REGULATION, ABOUT THE WAY BUSINESS IS DONE IN CHINA? SHOULD THEY BE SOMEWHAT WARY OF THESE OFFERINGS?

GREENBERG: I THINK YOU COULD DO BUSINESS OUTSIDE YOUR OWN COUNTRY NO MATTER WHAT COUNTRY IT'S IN.YOU HAVE TO BE THOUGHTFUL ABOUT WHAT YOU'RE DOING. BUT, YOU KNOW, THERE'S A LOT OF SUCCESSFUL COMPANIES IN CHINA.WE HAVE AN INVESTMENT DIVISION THAT DOES INVESTMENTS IN CHINA QUITE SUCCESSFULLY. IT'S A FULL-TIME UNIT WE HAVE IN SHANGHAI AND IN BEIJING AND IN HONG KONG. LOOKING AT INVESTMENTS ALL THE TIME. WE'VE BEEN DOING THAT SINCE I LEFT.

FABER: WE HEAR OFTENTIMES TWO SETS OF BOOKS.THERE'S THE OUTSIDE SET OF BOOKS, THE INSIDE SET OF BOOKS.

GREENBERG: THERE'S A LOT OF THINGS THAT ARE SAID THAT, YOU KNOW, SOME THAT MAY BE TRUE.BUT CHINA HAS LEARNED A GREAT DEAL. YEAR BY YEAR. THEY'VE COME SO FAR.SO QUICK.THERE'S A LOT OF CATCH-UP TO DO. BY AND LARGE, I'D SAY IF YOU KNOW WHAT YOU'RE DOING, YOU CAN DO WELL IN CHINA.

FABER: THANKS FOR BEING HERE. APPRECIATE IT.

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