AIG appoints a new chairman

Willumstad to replace Zarb, is ex-Citi official

September 21, 2006|By Bloomberg News

NEW YORK -- American International Group Inc. named former Citigroup President Robert B. Willumstad as chairman yesterday, completing a management overhaul prompted by probes that led to fines and restatements of results by the world's largest insurer.

Willumstad, 61, becomes AIG's first permanent chairman since Maurice R. "Hank" Greenberg stepped down in March 2005. Frank G. Zarb, who had been a temporary replacement, will relinquish the post Nov. 1, AIG said.

"Willumstad has a great reputation," said J. Paul Newsome, an analyst at A.G. Edwards & Sons Inc. in St. Louis who has a "buy" rating on AIG's stock. "He's a less controversial person compared with Hank and Zarb."

Willumstad's appointment may help AIG distance itself from the investigations, which triggered two earnings restatements last year and a $1.64 billion payment of fines and restitution in February. Greenberg, removed under Zarb's direction, is fighting a civil fraud lawsuit by New York Attorney General Eliot Spitzer.

"AIG wants to draw a proper line under its past," said Kevin Ryan, an analyst at ING Financial Markets in London. Willumstad brings "a fresh pair of eyes that will be able to look after the public face of the company and its relationship with regulators."

Willumstad, who couldn't be reached for comment, was considered a top contender for chairman when he joined AIG's board in January. A Brooklyn native and graduate of Long Island's Adelphi University, he ran Citigroup's consumer-lending unit after Citicorp's 1998 merger with Travelers Group Inc. and became president in 2002.

He left the biggest U.S. bank in July 2005, saying he would seek a post running a company.

"His style is suited to insurance where things like legacy and stability matter," said Phillip H. Phan, a finance professor at Rensselaer Polytechnic Institute in Troy, N.Y., who wrote Taking Back the Boardroom. "Willumstad is a consensus builder. He values consensual decision-making more than quick action."

The announcement has already drawn praise from Starr International Co., a private investment firm run by Greenberg that holds more than 305 million AIG shares. Greenberg knows Willumstad from his time at Citigroup, said Brooke Parker, a spokeswoman for Starr.

"Starr International, AIG's largest shareholder, welcomes Mr. Willumstad's election," she said, declining to comment further.

Willumstad's appointment underscores a shift in corporate governance at AIG, where Greenberg had been both chairman and chief executive officer for 16 years. Martin J. Sullivan, formerly co-chief operating officer under Greenberg, replaced him as CEO and seven of its 15 board members are new.

"He's a global manager and knows how to run a very complicated global business and can add a sounding board for Martin Sullivan," said Alan Straus, a portfolio manager at Lord Abbett & Co. in Jersey City, N.J. The firm manages $105 billion, including 9.7 million AIG shares as of June.

Shares of AIG fell a penny to close at $65.58 yesterday on the New York Stock Exchange.

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