Greenberg, Maurice

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Greenberg, Maurice

(1925-)
American International Group (AIG)

Overview

Considered by some to be the most powerful single personality in the insurance business, billionaire Maurice "Hank" Greenberg heads the American International Group (AIG), a multinational giant and the largest underwriter of commercial and industrial insurance in the United States. Having served as the company's CEO for more than thirty years and its chairman for more than ten, Greenberg has been dubbed a legend. Greenberg took the company public during his first year as CEO. Greenberg is widely and enthusiastically admired in the financial world for his management abilities and long–term consistency in keeping AIG an outstanding performer in the industry.

Personal Life

Greenberg was born to Jacob Greenberg and Ada Rheingold in 1925. Although born in New York City, according to Forbes, Greenberg was a "farm boy." He is professionally trained in law, having completed a pre–law program from the University of Miami in 1948 and earning a Bachelor of Laws (LL.B.) degree from New York Law School in 1950. His prospective career in law was interrupted by service in the U.S. Army during World War II in the 1940s, and the Korean Conflict in the early 1950s. While serving in the military, Greenberg attained the rank of captain and received the Bronze Star (awarded for heroism or meritorious achievement in ground combat). Upon return to civilian life, he was admitted to the New York Bar Association in 1953. He did not practice law, but instead went into the insurance business.

Greenberg has spent his entire professional career, spanning 50–some years, between two insurance companies—more than 40 of them with AIG. His leadership style (demanding the best) and personal drive has taken him to the top in the insurance industry, and near the top in personal wealth. (Forbes magazine rated his personal worth in 2001 at $3.9 billion, and listed him as No. 16 in its overall list of 800 Best Paid CEOs 2001.)

Greenberg is considered an aggressive, demanding, and driven leader who has remained spry and athletic despite his advancing years (upper 70s). He is a fast and skilled downhill skier and tennis player, and works out most mornings. Greenberg is married to wife Corinne Phyllis Zuckerman and has four children. He had built AIG up with the intention of keeping it a "family" concern, but second son Evan, who had been with AIG for 25 years and had been named as intended successor, abruptly resigned while serving as president in 2000. No reason was given for his departure, but he spoke highly of his father and there was no reason to believe a family feud had been the cause for his departure. Another (and the eldest) son, Jeffrey, also served as a senior executive of the company until 1995, when he too left the company only to resurface as head of the risk–capital operation at Marsh & McLennan, the nation's largest insurance broker (which does a great deal of business with AIG).

Greenberg is chairman of the U.S.–China Business Council, the U.S.–ASEAN Council on Business and Technology, The Starr Foundation, and he is the founding chairman of the U.S.–Philippine Business Committee. He is a member of The Business Roundtable, the White House Economic Roundtable, and the President's Advisory Committee for Trade Policy and Negotiations. He serves as vice chairman of the council on Foreign Relations the Center for Strategic and International Studies. Additionally, he is trustee of The Asia Society and chairman emeritus and member of the Board of Governors of The Society of The New York Hospital, and he is dedicated to several other charitable and civic organizations. Greenberg heads the Starr Foundation (named after company founder), and oversees the disbursement of major financial support to a number of academic, medical, cultural, and public policy institutions. He was honored as the 1998 Insurance Leader of the Year by the New York College of Insurance. He holds six honorary degrees, including from the New England School of Law, Bryant and Middlebury Colleges, and Brown and Pace Universities.

Career Details

Foregoing a career in law, Greenberg began his career in insurance at the Continental Casualty Company in 1952. In 1960, he joined AIG, a company originally founded in Shanghai in 1919 by American entrepreneur Cornelius Van Der Starr (Starr). Under the original name of American Asiatic Underwriters (AAU), then 27–year–old Starr initially represented American insurance companies offering fire and marine coverages. The money–starved Californian continued to run the company for the next 49 years, until his death.

Two years after joining AIG, in 1962, Greenberg was named president of the company's main subsidiary, American Home Assurance Company. He served in that capacity for five years. In late 1967, the American International Group Inc. was formed to hold the shares of the domestic companies. Shortly thereafter, company founder and CEO Starr decided to groom Greenberg to take over the company. At that time, AIG was a private company with revenues of approximately $300 million. When Starr died a few months later, Greenberg was named the new president and CEO, and within another year, the company went public.

One of Greenberg's most notable contributions to the insurance industry was his encouragement of the risk management movement in the 1960s. At a time when other insurers and brokers were attempting to deter policyholders from keeping large retentions, for fear of losing premium income, Greenberg took the opposite view and encouraged the trend. According to Richard E. Stewart, chairman of Stewart Economics in Chapel Hill, North Carolina, Greenberg "realized that keeping predictable levels of risk was an economically sensible thing to do." Stewart was a principal on the selection committee for the College of Insurance in New York, which named Greenberg the 1998 Insurance Leader of the Year.

That philosophy helped Greenberg pull the company through the latter 1970s and early 1980s, when the property/casualty industry was experiencing rough times. AIG continued to focus on underwriting policies and underwriting results rather than on market share. As a result, in more than 30 years as leader of the company, AIG's stock earnings per share dropped in only one year (1984)—an incredible record of success.

Greenberg is also known for his accomplishments in global expansion of the company. AIG gained a head start in the international arena by having been first established in Shanghai. It was evicted by World War II, then re–entered the area, but was again evicted from the country by Communists. In 1992, after many years of heavy lobbying by Greenberg, AIG again gained access to two Chinese cities, Shanghai and Guangzhou (near Hong Kong). The Asian market represented an untapped market for life insurance products.

Domestically, Greenberg helped create a niche market in the P&C field by specializing in environmental risks and kidnap–and–ransom policies, in addition to supplying the insurance needs of U.S.–based multinational corporations. In the late 1990s, AIG began pushing hard into the auto–insurance arena; several years earlier, Greenberg had tried to buy GEICO, but negotiations fell through. Notwithstanding, by 1999, AIG was reporting more than $70 million profits for its auto insurance operations.

It is Greenberg who is credited with building the most powerful insurance company in America over a period of three decades. Greenberg had always been interested in growth and acquisition, but early on, Greenberg began to stimulate internal growth rather than issue new stock. What distinguished AIG from others in the insurance industry was its strong owner management. Nearly 30 percent of AIG's stock is controlled by management, and some of the control is exercised through private companies whose character is only vaguely referenced in proxy statements. A company known as Starr International Co. (SICO) owns 16 percent of AIG, but is an offshore company incorporated in Panama. About 300 top executives at AIG have restricted stock in Starr International but can exercise their stock options only upon reaching the age of 65. Starr International is not to be confused with the C.V. Starr & Company, which is a private holding company that owns about 2.4 percent of AIG, and in which 40 of AIG's top executives own private stock. Of more interest to analysts is that the Starr Company generates policies and premiums for AIG, and gets paid more than $30 million a year for it. Greenberg has a 25 percent interest in Starr, an undisclosed stake in SICO (but estimated to be worth many millions of dollars), and more than 16 million shares of AIG stock. His 2001 net worth was nearly $4 billion.

Chronology: Maurice Greenberg

1925: Born.

1950: Received LL.B degree from New York Law School.

1952: Joined Continental Casualty Insurance Company.

1953: Admitted to the New York Bar.

1960: Joined AIG.

1962: Named president of AIG's subsidiary, American Home Assurance.

1967: Named president and CEO of AIG.

1969: AIG went public.

1989: Named Chairman of AIG.

But AIG has diverse interests outside of the insurance industry as well, which causes both consternation and curiosity from outsiders. AIG was (and is) in the "multiline" business, that is, selling both property and casualty insurance (P&C) as well as life insurance. AIG owns a private golf course, "Morefar," north of New York City, and it also owns Mt. Mansfield Corporation, the proprietor of Stowe, a ski resort in Vermont. Greenberg had foreseen a softening in the P&C business and had jumped the gun to search for auxiliary sources of profits. These have included a commodity and currency trading company and the International Lease Finance Corporation (ILFC), which has $14 billion in airplanes leased out to carriers throughout the world. AIG has also started a credit–card operation in the Philippines. Notwithstanding these diverse interests, AIG reported that 80 percent of its 2000 earnings remained insurance. In 2001, the company operated in 140 countries, with a very large market in Asia.

Greenberg has been called tough, demanding, impatient, focused, tireless, and tenacious, but can be charming as well. His style of management includes a strong penchant for centralization, and he has made his mark as an executive who leads by example and hard–work and usually gets the best performances from his workers. Internal auditing of the staff is routinely conducted by 100 people at AIG. The results (of any misdoings by employees) are directly reported to Greenberg, in writing, as well as some other top–executives who are expected to know the results almost immediately after receiving the reports. It is said that Greenberg spends about 50 hours every fall in budget meetings comprised of at least 25 different operating units. Each unit has its own book containing a business plan, and Greenberg is known to read every one of them and be loaded with questions for the meeting.

Greenberg is the only CEO that AIG has had since it went public in 1969. The company continued to report stable and impressive earnings, reporting 2000 profits of $5.6 billion. As of 2001, the company offered financial services, asset management including aircraft leasing, financial products, trading and market making, consumer finance, real estate investment management, and retirement savings products. Greenberg has told analysts that he would like to expand the retail mutual fund business. He has always made use of AIG stock to make deals and acquisitions, most recently paying $23 billion for American General Finance Corporation (the second largest writer of life insurance policies in the U.S.) in 2001; $1.2 billion for boutique insurer HSB Group in 2000; and $18 billion for asset manager SunAmerica in 1999.

Social and Economic Impact

For shareholders, AIG has been a dream stock for decades. Since 1989, the company boosted earnings per share an average of 15.5 percent per year. During the 1990s, stock prices zoomed nearly 30 percent a year, making it a favorite for investors seeking consistent performance. According to a statement made in the October 2001 issue of Money magazine by James Ellman, manager of Merrill Lynch Global Financial Services, "By the end of this decade, we'll have 10 major global financial supermarkets, and AIG will be one of them." Under Hank Greenberg's leadership, AIG has become one of the most profitable and premier commercial insurance providers in the United States.