Raters cast wary eye to Greenberg departure

Rating agencies have taken a dim view to confirmation late Monday that AIG CEO and chair Maurice “Hank” Greenberg will retire. But it was not only news of the 79-year-old industry veteran’s exodus which caught rater’s attention AIG also announced it would delay filing of its 2004 results (i.e., its 10-K filing), and that CFO Howard Smith has taken leave from the company.
AIG says Greenberg will be replaced as CEO and president by current vice chair and co-COO Martin J. Sullivan, while fellow co-COO Donald P. Kanak will take over the full COO role and become executive vice chair. Steven J. Bensinger will become CFO, treasurer and comptroller. Greenberg will remain as non-executive chair.
As to the late filing of its 10-K annual report, which was due March 16, AIG says the management changes “as well as the company’s ongoing internal review of the accounting for certain transactions” are to blame. However, AIG says it “does note believe that any of the matters subject to review are likely to result in significant changes to the company’s financial position”.
However, rating agencies were less certain. A.M. Best has placed AIG’s financial strength ratings (“A++” for most major subsidiaries) under review with negative implications, while Standard & Poor’s has also place a negative watch on AIG’s “AAA” financial strength and long-term counterparty credit ratings.
A.M. Best does note that the company’s operating fundamentals remain strong, and the ability to generate earnings should continue, but could not ignore the “premature” retirement of Greenberg and Smith, nor the many regulatory investigations to which AIG is currently subject. S&P says it is “not aware of any transaction or group of transactions that would result in a material financial impact on AIG at this time. However, uncertainty exists as to whether the financial information both public and private upon which the ratings have been based will be modified”.