Maurice Greenberg, the former CEO of American Insurance Group...

Former AIG head begins anew with C.V. Starr:

According to the NY Times (October 27, 2009), Maurice Greenberg, the former CEO of American Insurance Group (AIG) has been quietly hiring employees from AIG to fill posts at his new insurance company, C.V. Starr. Greenberg, who built AIG over the past four decades into the world's largest insurance company with $1 trillion in assets, was ousted in 2005 over an accounting scandal brought about by a complaint issued by Eliot Spitzer, former NY Attorney General. Greenberg maintained his innocence throughout the investigation and all criminal charges were subsequently dropped. Since then Greenberg has been battling AIG over stock in which they both laid claim. AIG in the meantime suffered staggering losses from the trading of complex derivatives by its financial products unit and was on the verge of insolvency last year when the federal government decided to step in and save it. With the demise of AIG Greenberg lost nearly all of his life's savings.

This past summer Greenberg finally won his suit against AIG and reclaimed the rights to $4.3 billion in retirement funds. Instead of using his money to live out his golden years, Greenberg who is 84 has been redirecting the funds to recreate another AIG. With the Treasury recently setting employee compensation limits on companies which have received bailout money, Greenberg is now in an even stronger position to lure away AIG's best talent to help run C.V. Starr. As the largest investor in AIG, the government (and taxpayers) stand to lose billions if AIG fails to recover. Greenberg, who is AIG's second largest shareholder, is similarly exposed. For this reason, it doesn't make sense for Greenberg to want to hurt his former employer.

One can't help but admire the resiliency of Greenberg to start over at such a late age. What motivates an eighty-four-year-old billionaire to do such a thing? Clearly it is not the money. There are arguably other driving factors. Perhaps Greenberg feels like he has something to prove to those who claimed he was responsible for the demise of AIG. No longer at the helm, Greenberg cannot direct AIG back to profitability. Moreover with the government calling the shots on how AIG should be run, Greenberg would likely feel suffocated by the oversight if given the opportunity. With C.V. Starr, Greenberg can demonstrate to those who doubted and accused him that he still has what it takes and had he been at the helm last year, AIG would have weathered the storm. And why shouldn't we expect Greenberg to hire his former employees? Who in the business world doesn't invoke this strategy whenever they are able? Going with loyal proven performers just makes good business sense, especially when they can be picked up at bargain prices.

Greenberg may be building C.V. Starr to silence his critics, but I don't think so. I believe Greenberg is building C.V. Starr because that is what he was born to do. Greenberg knows insurance undoubtedly better than anyone else on the planet. Nothing energizes him more than to discover new ways to unlock value by mitigating the risk of others. Had he not been ousted from AIG, he arguably would be there today fulfilling his life's calling. Recreating AIG through C.V. Starr is not an option for Greenberg. Rather, it is simply part of his life's work. Incidentally, C.V. Starr is named after AIG's founder, Cornelius Vander Starr who hand-picked Greenberg in 1968 as his successor.

Pete Canalichio