American International Group Inc. chief executive Maurice R. "Hank" Greenberg, who has run the world's largest insurer for almost four decades, retired yesterday during probes of potential earnings manipulation and bid-rigging.
Greenberg, 79, will be replaced by co-Chief Operating Officer Martin J. Sullivan, 50, and stay on as non-executive chairman, New York-based AIG said in a statement yesterday. Chief Financial Officer Howard I. Smith, 60, has taken leave and was replaced by Treasurer Steven J. Bensinger, 50.
Maurice R. Greenberg has led AIG since 1967.
(Rebecca D'Angelo--For The Washington Post)
"The board has concluded it is now in the best interest of AIG's shareholders, customers and employees to turn to a new generation of leadership," said Frank G. Zarb, chairman of the executive committee of the board, in a statement.
Greenberg is the most prominent executive to step down since New York Attorney General Eliot L. Spitzer touched off an investigation of fraud in the insurance industry in October. Since taking over in 1967, Greenberg boosted AIG's assets more than a thousand-fold, making $50 billion in acquisitions to reach 50 million customers in 130 countries.
He built the company into one of the most valuable in the United States, with a market capitalization of $166 billion, and one of the most profitable, with record earnings last year of $11.05 billion.
For years he refused to discuss who would succeed him. In January, he said in an interview at the World Economic Forum in Davos, Switzerland, that he had agreed on a succession plan with the board that would be implemented "when it's appropriate."
Since that time, investigations of the company and Greenberg have widened. AIG said last month that Spitzer and the Securities and Exchange Commission subpoenaed the company. Spitzer and the agency are probing a four-year-old reinsurance transaction between AIG and Berkshire Hathaway Inc.'s General Re Corp. unit that may have helped AIG smooth earnings, according to people familiar with the matter.
An assistant for Greenberg said he was not available, and Sullivan didn't return phone calls. Spitzer spokesman Darren Dopp and SEC spokesman John Nester declined to comment.
Spitzer's investigation into bid-rigging already forced Greenberg's son, Jeffrey W. Greenberg, from his post as chief executive of Marsh & McLennan Cos., the world's largest insurance broker.
In an Oct. 14 lawsuit against New York-based Marsh, Spitzer alleged the broker colluded with insurers including AIG. Since then, four AIG employees have pleaded guilty to rigging bids with Marsh, agreeing to testify in future cases. AIG has not been sued.
Greenberg's choice for successor had been unclear since his son Evan W. Greenberg left the company in 2000 without explanation. Sullivan had been chief operating officer since May 2002, sharing his title with Donald P. Kanak, who had been the other favorite to succeed Greenberg. A London native, Sullivan started at AIG as a teenager.
Sullivan will become only the third chief executive in AIG's 85-year history. Greenberg, who was paid $7.59 million in 2003, succeeded founder Cornelius Starr and took the company public in 1969.
The shares of AIG fell 86 cents, or 1.3 percent, to $63.85 in New York Stock Exchange composite trading yesterday. The stock has fallen 13 percent since AIG disclosed the Spitzer subpoenas on Feb. 14.