Robert H. Benmosche has had an outstanding career in insurance and financial services. Over the past three years, Mr. Benmosche has been responsible for helping to save American International Group (AIG) from collapse during the worldwide financial crisis that started in 2008, and returning it to financial stability and profitability. Previously, as Chairman and CEO of MetLife, he was responsible for overseeing the demutualization of the company, and leading it to strong growth and performance as a public company.
Robert H. Benmosche had already completed a highly successful career in the insurance industry, having led MetLife through its demutualization and to success as a public company, when he came out of retirement in August 2009 to lead AIG out of a deeply complex crisis that involved unprecedented involvement by the U.S. government in a publicly traded company and widespread public anger over that support.
The global financial system found itself in crisis in mid 2008, as the plummeting value of mortgage assets prompted widespread illiquidity across asset classes. In September 2008, AIG either held or insured more than $40 billion of illiquid mortgage assets. When rating downgrades on AIG triggered pledges to pay holders of complex mortgage products that had declined in value, AIG did not have the cash to meet those obligations. The inability to meet those obligations caused a ripple effect on the holders of these products, all financial institutions, many whose capital levels could be imperiled absent payment. This and other factors led the U.S. government, over the course of 2008 and 2009, to provide more than $182 billion of support to limit the damage that AIG’s crisis might have on the broader global financial system.
The company was in crisis. In March 2009, AIG had reported a net loss for the full year 2008 of $99.3 billion, compared to net income of $6.2 billion for full year 2007. Meanwhile, government support connected to AIG had taken many forms, including direct loans to the company, equity capital lines, the creation and funding of special purpose vehicles (SPVs) that bought illiquid mortgage assets from AIG, the creation of SPVs to hold certain AIG assets for the benefit of the government in exchange for a reduction in debt, and access to certain government funding programs. A trust created by the U.S. Department of the Treasury (Treasury) also owned 80% of the company outright.
AIG’s creditors and its Board of Directors had determined that the best course of action would be to break up AIG and sell off its businesses in an effort to recoup the government’s investments. But that strategy had been stymied to that point by profoundly difficult market conditions in which the natural buyers of AIG’s assets were either offering amounts far below the assets’ value or the buyers themselves were unable to raise the necessary capital to fund attractive offers.
In the meantime, AIG faced an onslaught of public anger in the U.S., a country with a long history of a basic belief in separation between government and business. When AIG and many other financial institutions faced collapse absent government support, the general public was angered that AIG had been allowed to get into such a situation in the first place, and frustrated in that they felt the executives responsible for AIG’s problems were still being rewarded with bonuses.
Mr. Benmosche arrived in August 2009 and quickly convinced the AIG Board of Directors and the government to halt all sales of AIG businesses given depressed market conditions; identify and keep certain core insurance operations for the long term; and take the time to allow markets to recover so that other businesses could be sold at fair value rather than distressed prices. He inspired employees around the world, meeting with them, listening to their challenges and needs, and standing up to the company’s critics both directly and in the media. He defended the employees of the derivatives business who were not responsible for AIG’s problems, but stayed to help fix them; gave them his support; and resolved pay issues across the company. He identified the businesses that would remain core to the company and set operating priorities to position them not only for restoring sales, but also for growth. In so doing, he began what Barron’s has called “one of the great management stories of the new century. 1
In January 2010, AIG began executing its plan to repay the U.S. government, in part converting various forms of assistance to common stock, and leaving the Treasury owning 92 percent of AIG’s common stock outstanding. As of September 14, 2012, the Treasury and the Federal Reserve Bank of New York (FRBNY) has received a combined positive return of approximately $15.1 billion from its overall $182.3 billion commitment to AIG. Government ownership has been reduced to only approximately 15.9 percent of AIG common stock; all loans and obligations have been repaid in full; and many of the special purpose vehicles have been retired, with their applicable obligations met in full. The AIG Financial Products derivatives portfolio was unwound in 2011. Every share of AIG common equity that the Treasury has sold has been at a profit. AIG’s core insurance operations have been consistently profitable. Sales have returned to normal levels and for certain products are higher than prior to the crisis, and the company has restored its relations with all of the distribution partners that had halted selling AIG products. Employee morale is strong, turnover is at normal levels, and AIG has instituted improved practices related to risk management, performance-driven compensation, and other areas. Today, AIG stands as the world’s largest insurance company by shareholder equity.
Importantly, AIG’s turnaround also mitigated a global wave of repercussions that the failure of a company the size of AIG could have caused. AIG’s potential demise threatened millions of businesses, families, and individuals around the world. AIG currently employs approximately 57,000 people globally, and many of those jobs would have been jeopardized had the company collapsed or broken up. AIG’s more than 85 million customers around the world also may have been hurt by changes and losses in coverage. In AIG’s absence, other insurers would have been left scrambling to cover additional clients.
THE AIG TURNAROUND
Shortly after joining AIG in August 2009, Mr. Benmosche convinced the government and the Board of Directors to reconsider its restructuring plan for AIG. In testimony before a panel established by the U.S. Congress to review government investment in various companies, Mr. Benmosche said, “Prior to my arrival, AIG had focused on repaying taxpayers by moving quickly to divest certain key parts of the organization. Although the company faced pressure from multiple stakeholders to quickly sell assets to show progress, I knew that this was not the best course of action. 2
Under Mr. Benmosche’s leadership, AIG began planning and executing a series of transactions when market conditions improved – including conducting in October 2010 a successful initial public offering of its pan-Asian life insurer, AIA, which generated $20.5 billion in proceeds (the third largest IPO at the time); and selling outright another international life insurance company, ALICO, to MetLife, for $16.2 billion. These and other actions ultimately raised more than $47 billion, most of which was directly payable to the U.S. government. In December 2010, AIG succeeded in accessing the capital markets for the first time in more than two years, issuing $2 billion of senior unsecured notes and establishing a $500 million contingent liquidity facility. Later the same month, AIG entered into 364-day and three-year bank credit facilities totaling $3 billion.
These actions convinced the Treasury and the FRBNY that the breakup of AIG was not necessary, and the complete recapitalization of the U.S. government investments in AIG was put in motion. On January 14, 2011, AIG announced that it had repaid all of the loans it owed to the FRBNY and that the U.S. government had consolidated its remaining exposure to AIG into common equity that constituted a 92% ownership stake in the company. For the U.S. government to “break even” on its equity stake in AIG, it would need to sell each share for at least $28.73.
Since announcing that accomplishment, AIG has continued to execute on Mr. Benmosche’s vision, particularly focusing on improving operating performance of its remaining core insurance operations, as well as investing in AIG’s technology infrastructure.
The company’s improving performance over 2011 and 2012 has allowed the Treasury to sell approximately 1.4 billion of its shares of AIG common stock to the general public for total proceeds of approximately $44.0 billion. To date, the Treasury has been able to price all of its stock offerings to recoup a profit, and AIG’s stock price has continued to rise, closing at $35.02 on September 14, 2012. Following the September 2012 common stock offering, the Treasury announced that it estimated that it and the FRBNY had to date received a positive return of approximately $15.1 billion from the $182.3 combined authorized investments in AIG. This profit did not include Treasury’s remaining 15.9% stake in AIG, which, if valued at the September 13, 2012, closing price of $34.44 per share, would provide an additional profit of approximately $8.1 billion.
Treasury Assistant Secretary for Financial Stability Timothy G. Massad heralded AIG leadership for its role in the turnaround on the Treasury Notes blog: “[The successful September 2012 offering] is a credit not only to the overall strategy and the work of many people across both Democratic and Republican administrations and at the Federal Reserve, but also to the efforts of AIG under its new leadership to restructure the company and pay back the taxpayer.” 3
In addition, under Mr. Benmosche’s leadership, AIG has returned to consistent profitability, with strong performance by the company’s core insurance operations. On August 2, 2012, the company reported net income attributable to AIG of $2.3 billion and after-tax operating income of $1.9 billion for the quarter ended June 30, 2012, compared to net income of $1.8 billion and after-tax operating income of $1.2 billion for the second quarter of 2011.
AIG previously reported net income of $3.2 billion and after-tax operating income of $3.1 billion for the quarter ended March 31, 2012, compared to net income of $1.3 billion and after-tax operating income of $2.1 billion for the first quarter of 2011. For full year 2011, AIG’s second year in a row posting a full-year profit, net income attributable to AIG was a record $17.8 billion, compared to $7.8 billion in 2010.
Mr. Benmosche’s appointment to AIG is recognized as one of the most important steps in the company’s turnaround. Since his arrival in 2009, he has articulated a clear strategy for AIG’s emergence as an independent company that preserves and creates shareholder value. He has inspired AIG’s employees to improve each day to build the world’s most valuable insurance company. Mr. Benmosche has shown the same extraordinary level of leadership, energy, and commitment to AIG since he joined the company, including after announcing in 2010 that he had been diagnosed with cancer.
As AIG Chairman of the Board Robert S. Miller said in AIG’s 2012 Annual Report, “The unprecedented accomplishments, persistence, and commitment of Bob and the people of AIG raise the bar on what we as Board members think is expected of us.”
Mr. Benmosche joined AIG as President and Chief Executive Officer in August 2009, when he was also elected to the AIG Board of Directors. Mr. Benmosche retired as Chairman and Chief Executive Officer of MetLife, Inc. in 2006 after an 11-year career during which he led the transition of MetLife from a mutual to a public company in April 2000. Despite launching in a bear market, the stock doubled in the first two years following the IPO, and the company continued to produce strong results until his departure in 2005. He also led MetLife through two significant acquisitions: General American, for $1.2 billion, and Traveler's Life and Annuity from Citigroup, for $11.8 billion. He joined MetLife as an Executive Vice President in 1995 to direct the merger of New England Mutual with MetLife, and to head MetLife's Individual Sales force and Retail Product Development. Mr. Benmosche was President and Chief Operating Officer of MetLife from 1997 until he was named Chairman of the Board, President, and Chief Executive Officer in 1998. Earlier in his career, he served as Executive Vice President for PaineWebber, Inc., where he directed the merger of Kidder Peabody into PaineWebber. He also oversaw the reengineering of PaineWebber’s operations, moving the firm’s technology into a client server architecture, and developing a state-of-the-art operations center. From 1976 to 1982, Mr. Benmosche served in various capacities with Chase Manhattan Bank. He is a Member of the Board of Directors of Credit Suisse Group AG, and has served on the Boards of Directors of the New York Philharmonic and Alfred University. He received a B.A. in Mathematics from Alfred University in 1966.
- Mr. Benmosche served in Korea during the Vietnam War as a Lieutenant in the United States Army Signal Corps. In 2012, he was honored with The Korea Society’s General James A. Van Fleet Award, which is awarded annually “to one or more distinguished Koreans or Americans in recognition of their outstanding contributions to the promotion of U.S.-Korea relations.” It is one of the most prestigious awards in the field of U.S.-Korea relations.
- Mr. Benmosche has been outspoken in his support of regulatory oversight, not only of AIG, calling it a good thing for AIG and other companies to have to meet stringent capital requirements.
- On September 26, 2001, Mr. Benmosche testified before the Unites States House of Representative’s Financial Services Committee on the impact of terrorism on the insurance and securities industries in the wake of the September 11, 2001, terrorist attack on the World Trade Center.
- Mr. Benmosche assured Congress that the insurance industry was prepared to quickly respond to, and support, the needs of the country, saying, “The foundation of our industry is the promise to our policyholders that we will be there in their time of need. By honoring this commitment, we hope to do our share to help our nation recover.”
- Throughout his career, Mr. Benmosche has advocated the use of cutting edge technology and data analytics to help insurers better understand risks and areas for improvement. Under his leadership, AIG:
- Partnered with Johns Hopkins University to analyze workers’ compensation claims data to better serve clients, help inform patient treatment, and run a sound business.
- Helmed AIG’s first Longevity Conference, inviting top scientists and industry experts to help understand the effect of longevity trends on the insurance industry.
- Implemented the Risk Adjusted Profitability (RAP) metric at AIG to better align risks with new lines of business and expansion into new markets, and orchestrated a comprehensive review of the competitive landscape for new business, with a focus on expense discipline and risk selection.
- Received the 2012 SAS Enterprise Excellence Award, given to AIG’s property casualty business for its innovative use of SAS software in the areas of Analytics, Predictive Modeling, and Claims Servicing.
- Was awarded two 2012 Innovation Awards by Business Insurance, the third consecutive year its Property Casualty business received the recognition.
- The 2012 awards was presented for Investigation Edge, the first insurance solution to cover company costs arising from investigations by securities regulators, and for the accredited web-based Environmental Insurance Programme that helps risk managers and brokers navigate the United Kingdom’s complex new environmental liability laws and market.
- Received the Celent Model Insurer Component 2012 award, given to its Property Casualty business for the effective use of technology in predictive risk analysis.
Awards and Honors:
- Executive of the Year, The New York Times DealBook, 2011.
- 42nd on Fortune’s list of top business leaders, 2010.
- Honoree, The New York Rita Hayworth Gala, recognizing those dedicated to the fight against Alzheimer’s disease, 2005.
- Corporate Citizens Award, part of The National Arts Awards presented by Americans for the Arts during National Arts & Humanities Month to distinguish private sector arts leadership, 2001.
- The Jewish Theological Seminary’s Louis B. Marshall Award, recognizing those who demonstrate exemplary ethics and communal commitment, 1999.
Nominator - James A. Mallon, President & Chief Executive Officer, American General Life Companies and President, Life & A&H, SunAmerica Financial Group
Seconds: Jim Millstein, Chairman and Chief Executive Officer of Millstein & Co., and former Chief Restructuring Officer at the U.S. Department of the Treasury; and, Harry Kamen, former Chief Executive Officer and Chairman of the Board of MetLife
1“The Man Who Saved AIG.” Barron’s, Leslie P. Norton, August 11, 2012.
2“Testimony by Mr. Robert Benmosche, President & Chief Executive Officer, American International Group.” Before The Congressional Oversight Panel, May 26, 2010
3“INFOGRAPHIC: Overall $182 Billion Committed to Stabilize AIG During the Financial Crisis is Now Fully Recovered.” Treasury Notes, Timothy G. Massad, September 11, 2012.