Sunday, November 25, 2007

Hank Greenberg - A return to AIG?

On the 2nd November 2007, Hank Greenberg, former AIG CEO & insurance industry icon, filed a 13D with American International Group (AIG) indicating that he and other interested parties are considering strategic alternatives for AIG. Here is an extract from the 13D lodged...

"....The Reporting Persons believe that there are opportunities to significantly improve the Issuer's performance and strategic direction, as well as the value of their investment. In this connection, the Reporting Persons anticipate holding discussions with stockholders and third parties that may address a number of issues, including without limitation, their respective views on the Issuer's business and prospects, the suggested disposition of certain of its operations, investment opportunities and concerns over the direction and management of the Issuer generally, and other opportunities to improve or realize on the value of their investment in the Issuer.... "

Clearly Hank Greenberg believes AIG shares are undervalued and the company is performing below expectations. Hank controls through CV Starr & other companies over 12% of AIG and has the ability to exert considerable pressure on management, particularly if he can win the support of other shareholders.

AIG shareholders have experienced disappointing returns over the last 5 years and and may still hold a certain fondness for the tough talking Hank Greenberg who as CEO of AIG achieved 20% plus shareholder returns before his controversial exit in 2005.

AIG's financial results have been recently plagued by subprime writedowns and a softer insurance pricing business environment, AIG shares have suffered and are now trading at the cheapest levels in over 10 years trading on a PE multiple of 9 & a Price to Book ratio of 1.3. Typically AIG shares have traded above a price to book ratio of 2.

So is Hank making a play for AIG? Does he want the CEO job back or is it simply a case a revenge against a Board who turned their back on their CEO in the face of the New York A-G Spitzer's allegations against Hank Greenberg.

With a large part of his wealth invested in AIG shares Hank Greenberg obviously wants to improve the returns from his shares. Hank has recently accused the AIG board of being a bunch of lawyers and also that AIG lacked real leadership. Hank Greenberg has publicly said he does not want to return as CEO but there is no doubt with this recent 13D filing that he wants to to exert some control on the key leadership & board positions in AIG.

Personally as an AIG stakeholder, I would like to see Hank Greenberg return to AIG, whether you like or loathe Hank there is no doubt he knows AIG better than any other person and is more qualified than anyone to run AIG , even if he acts in simply a advisor role. Of course court proceedings are possibly pending & the outcome is unclear this may impact on his ability to work as director.

I will make further posts on this blog as the issue develops.

On a final note I do recommend Ron Shelp's book "Fallen Giant; The Amazing Story of Hank Greenberg and the History of AIG" for a great and well balanced account on Hank Greenberg and the extraordinary success he achieved with AIG. As David Schiff put it in a WSJ article (march 05) Hank Greenberg has "been the most important figure in the insurance business over the past 40 years."

Sources: Forbes,SEC database,Wall Street Journal
Disclosure: I own AIG shares

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