AIG shares jump as Benmosche strategy fuels hope

Discussion in 'Wall St. News' started by S2007S, Aug 20, 2009.

  1. S2007S


    They owe hundreds of billions of dollars and the stock rallies on hope of a turn around, this is a worthless company that shouldn't even be trading. This is an upside down economy and market place.

    Aug 20, 2009, 1:28 p.m. EST
    AIG shares jump as Benmosche strategy fuels hope
    New CEO halts sale of advisory unit; says he'll build, not liquidate

    By Alistair Barr & John Spence, MarketWatch

    SAN FRANCISCO (MarketWatch) -- American International Group shares jumped more than 25% Thursday as a strategy devised by recently hired Chief Executive Robert Benmosche fueled hope about the insurer's recovery efforts.

    Benmosche halted the auction of an investment advisory unit recently. He told employees he'll rebuild businesses and won't be rushed by the U.S. government into selling assets at unfavorable prices, Bloomberg News reported, citing a recording of an Aug. 4 town hall-style meeting for staff.

    "I don't liquidate things, I build them," Benmosche said in the recording. "When we get the fair value for those businesses, that's when we're going to sell them; it's not going to be before."

    The strategy is different from the one adopted by Edward Liddy, who became CEO of AIG /quotes/comstock/13*!aig/quotes/nls/aig (AIG 31.42, -0.88, -2.72%) last year after the company was saved by a government bail out that ballooned to more than $100 billion.

    Under immense pressure from the government and amid public outrage at retention bonuses paid to some employees, Liddy oversaw the quick sale of some AIG assets to help the insurer repay government support quickly. However, that strategy was difficult because the financial crisis prevented potential buyers from borrowing money to pay for big acquisitions. Some asset sales were criticized for unloading at too-low prices.

    Benmosche has already changed Liddy's approach. This week he pulled the auction of the AIG Advisor Group, a network of 5,500 financial advisers, because it complemented the insurer's retirement operations, according to AIG spokeswoman Christina Pretto. She declined to comment further

    AIG shares were up 26% to $33.50 during afternoon trading on Thursday. Earlier in the day, the stock hit $35, its highest level in roughly three months. The insurer has lost more than 91% of its market value in the past year and is roughly 80% owned by the U.S. government.

    AIG lost almost $100 billion last year as derivative-based guarantees it sold on complex mortgage-related securities known as collateralized debt obligations soured. Results improved in the second quarter of this year, when AIG generated net income of $1.82 billion, its first profit for two years. See story on AIG's second-quarter results.

    That may buy Benmosche more time than Liddy had to repay the government and revive AIG's fortunes as an independent company.

    According to the recording, Benmosche told employees that he "had the luxury to say to the government, I'm not going to rush to do this. I'm appalled at how much pressure has been put on all of you to just sell it no matter what, because the Fed wants out, or the Treasury wants out. If they want out in a hurry, they shouldn't have come in the first place."

    He also told employees that they shouldn't be worried about upsetting regulators.

    "It's time the people in Congress stopped talking about you as the problem, because you're the solution," he said. "It's not your fault, it's their fault, it's the regulators' fault."