Hank Greenberg Comments On AIG's (AIG) Sale of Nan Shan, Sees Volatility Ahead

Bloomberg recently did an interview with former American International Group (NYSE: AIG) chief Maurice "Hank" Greenberg, in which he discussed AIG's decision to sell Nan Shan Life Insurance, as well as his belief that AIG's business will be more volatile in coming years.

• Did Greenberg think that AIG got a fair price for Nan Shan? Greenberg answered that he hadn't seen the financials in a long time, but the company may be the largest life company in Taiwan.
  
  
• Did he think the sale of Nan Shan was a smart thing to do? No.
  
  
• Overall, did Greenberg think that AIG was negotiating good prices in their asset sales? Greenberg said that they were, in fact, getting good prices. Continuing, he said that you're giving up unique business prospects. AIA, for example, was the only 100% owned foreign life company in China, "that is a franchise that you cannot replicate. They sold American Life, licensed in 55 countries. These are assets you simply can't rebuild. You do not own them."
  
  
• Greenberg said that AIG was making itself weaker with the sale of Nan Shan. "You are giving up a major line of business that was a very major part of AIG, its foreign life insurance business."
  
  
• What is Greenberg's assessment of CEO Benmosche's sale of Nan Shan? Greenberg said that Benmosche had no choice, he's being forced to sell the assets. Greenberg then noted that he thinks Benmosche is the best leader they've had since he left the company.
  
  
• What does Greenberg think AIG needs to look for in a replacement for Benmosche? He says that they need a great manager with a global outlook, with the ability to build a culture back into the company.
  
  
• Does Greenberg think AIG will be a more volatile business going forward? Greenberg said, "Property casualty business is a strong business, and it's global. The property casualty business in the United States today is under great pressure, rates have been going down for five years. That is a tough business to be in. One reason the life business was so great, it was able to offset the cycles that take place in the property business - that diversification. When you reduce diversification, you increase volatility. So, AIG will have a more volatile business going forward."
  
  
• Would Greenberg invest money in AIG right now? He's not investing in AIG right now, noting that its going to take a long time for the U.S. government to sell its 92% stake in the company. "Getting rid of 92%, you've seen examples of that in Citigroup. The stock went no place until the government sold its last stock. So without overhang, who is going to buy stock?"
  
  
• Does Greenberg think that the U.S. government treated AIG fairly? He doesn't, saying AIG was singled out and that the treatment was unfair. "They could have given AIG a bank holding company license. They gave it to another insurance company. That would have given AIG access to the Fed window. The Fed could have guaranteed AIG financial products; that would have stopped everything in its tracks.
  AIG had liquidity problems, not a solvency problem…With a guarantee, that would have stopped any calls for collateral. But they didn't. AIG was used as a back door bailout, to Goldman Sachs and others who got paid 100 cents on the dollars for the CDOs. The value of CDOs was all over the lot. There was no price discovery, no exchange in which to trade them on. Everyone had a different price. Goldman Sachs' [price] was the lowest on the street. Why would you respond to that at all?"
  
  
• Why does Greenberg think that AIG was approached this way? Succinctly, Greenberg responded, "You will have to ask Hank Paulson, who was then Treasury Secretary and ex-CEO at Goldman Sachs and was surrounded by Goldman Sachs people. Who was fighting for AIG? I wasn't there. Who had the presence to do it? No one else was there to help."

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