Let’s get this straight.
Last year, American International Group’s board effectively canned its chairman and CEO, Maurice “Hank” Greenberg — the man responsible for building the company into an insurance industry behemoth over the past generation — in order to make nice with New York AG Eliot Spitzer.
Meanwhile, Mr. Greenberg is only 80 years old, so he needed to find something to do after AIG unceremoniously dumped him. Accordingly, Greenberg began paying more attention to the affairs of C.V. Starr & Co., the company closely-owned by Greenberg and other former and current AIG executives that used to provide a compensation perk for AIG executives. C.V. Starr’s relationship with AIG dates from the late 1960s when AIG became a public company — in fact, among C.V. Starr’s major assets are its shares in AIG.
Several subsidiaries of C.V. Starr have long sold AIG insurance policies to big manufacturing companies, so Greenberg last year decided to expand C.V. Starr’s sales operations by selling insurance policies for other companies. Two of those companies are Ace Ltd. an insurer run by Mr. Greenberg’s son, Evan Greenberg, and a unit of billionaire businessman Warren Buffett’s Berkshire Hathaway Inc. By the way, Mr. Buffett may have ratted out Greenberg to Spitzer to save his own skin, but that’s another story.
With that backdrop, it’s with more than a touch of irony that AIG is now suing C.V. Starr to stop Starr’s subsidiaries from selling insurance policies for companies other than AIG. The lawsuit accuses the Starr subsidiaries of “flagrant misconduct and self-dealing contrary to the best interests of AIG” by diverting a third of a business portfolio otherwise intended for AIG to the Berkshire unit. C.V. Starr counters by pointing out the knotty little detail that the six-page contract governing the relationship between the Starr subsidiaries and AIG does not provide that the Starr agencies will exclusively sell AIG policies.
Thus, even though AIG may have hedged the risk of an Enronesque experience by dumping Mr. Greenberg, it remains far from clear that the AIG board’s sacrifice of Greenberg at the altar of the Lord of Regulation was in the best long-term interests of AIG’s shareholders. Not only did AIG lose the executive primarily responsible for the company’s value, but it also gained a formidable — and a particularly motivated — competitor.
Let’s get this straight.