American International Group Inc.
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Case Code: BSTR115 Case Length: 34 Pages Period: 2002 Pub Date: 2002 Teaching Note: Not Available |
Price: Rs.500 Organization: American International Group Inc. Industry: Financial Services Countries: USA Themes: Corporate Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
"AIG shouldn't be all about Greenberg. The insurer's legendary 77-year-old CEO, is reluctant to name a successor, fostering the false notion that he's irreplaceable."
- BusinessWeek, May 2, 2002.
Introduction
With revenues of $62.402 billion in 2001, the US-based American International Group Incorporation (AIG) was the world's leading insurance and financial services company. It was the largest underwriter1 of commercial and industrial insurance, and the second largest life insurer in the US.
The company reported a net income of $7.67 billion and had assets worth $492.98 billion in 2001 (Refer Exhibit I). AIG was ranked 12th by Fortune magazine's list of America's 500 largest companies based on revenues in 2002. The company was ranked 2nd in the 'Insurance (Property and casualty)' section of Fortune's survey of 'America's Most Admired Companies. Founded in 1921, AIG's shares were listed on the New York Stock Exchange (NYSE) and on the stock exchanges of London, Paris, Switzerland and Tokyo. AIG served commercial, institutional and individual customers in more than 130 countries in the world. AIG's global businesses included insurance, financial services, retirement savings and asset management. The company offered a wide variety of general and life insurance products to its customers.
Its financial services businesses included leasing of aircraft, financial products, trading and market making and consumer finance. AIG's expanding global network and its strong presence in commercial insurance, financial services and life insurance businesses made it one of the global leaders in insurance and financial services business. However, analysts said that in recent years, it had been facing problems. The September 11, 2001 attacks on the World Trade Centre in the US costed AIG more than $800 million in claims. The company also incurred losses of $69 million owing to the collapse of Enron. By early-2002, the share price of AIG had fallen by 30% from a 2000 high of $104 to $69, despite strong earnings. With so much going against AIG, industry observers expressed doubts about AIG's ability to perform well in the future. AIG had also been criticized as it lacked a succession plan.
Maurice R Greenberg (Greenberg), the chairman of the company had not announced his retirement nor a succession plan, although he was 77 years old in 2002, and had spent 35 years as chairman. AIG's annual reports were said to lack transparency, as they did not disclose directors' fees and other required details. In response to the mounting criticism. Greenberg finally unveiled a succession strategy in May 2002. It included the appointment of two co-Chief Operating Officers (COO), and a chairman of the executive committee. The plan also included the creation of a new seven-member office to assist the chairman of the executive committee....
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