Stock of the Day
|
AIG (AIG)
AIG Oust CEO, Instates Successor
With investors, analysts, and the SEC breathing down its neck, AIG has decided it is time to shake-up the company's top brass. AIG has been a fixture in the news lately, as meltdowns in the financial sector continue to wear down the company and maintain the attention of weary investors. Today's news is a sign of change, however, as the company has acknowledged the removal of its current chief executive in favor of his replacement, the current chairman. After dismal results in recent quarters AIG is in need of a serious turnaround, but is keeping things in the family the right move to boost the company out of its rut?
|
| Daily Chart |
If you are not able to see the chart, your email client probably does not support javascript. To view it, please click here
|
| Stock Analysis |
A snapshot of AIG's current financial picture speaks volumes as to the troubles the company has been facing in recent quarters. In its release last month, the company's quarterly earnings statement showed a $7.81 billion loss, the worst results in AIG's 89-year history. Some of the company's financial ratings were immediately cut and it had to take action to bolster its balance sheet by raising $20 billion. Prior to this most recent quarter, AIG posted another record loss due to write-downs on its portfolio of credit derivatives and mortgage-related products. Costly losses stemming from the shaky subprime market have caused investors to jump ship, leading to a 50% decrease in share price in the past year. To add insult to injury, the SEC is investigating AIG to determine if it purposefully overvalued the derivatives that have led to the expensive write-downs.
|
AIG may not be pointing the finger at CEO Martin Sullivan for its current state of emergency, but the company has resoundingly decided that a new leader at the helm is necessary in order to turn things around. Sullivan has not only vacated his seat as CEO, but he is also leaving the company's board, where he has been a member since 2002. Sullivan's tenure with AIG began in London when he was hired as a clerk at age 17. Stepping up to replace Sullivan effective immediately is AIG's chairman, Robert Willumstad. Willumstad became chairman of the board in 2006 after leaving his position as president and chief operating officer of Citigroup (C: Charts, News, Offers) when he was passed over for the post of CEO.
|
Willumstad will now have his chance to shine at AIG, and investors are putting on the pressure to perform. First and foremost, Willumstad will have to give investors a solid idea as to how much worse the situation could get for AIG as the subprime crisis causes more write-downs. He'll also need to revive the company's deteriorating share price. He didn't waste any time in outlining his plans, releasing a statement on Sunday that said, "In the coming months, we will conduct a thorough strategic and operational review of AIG's businesses and their performance. The Board and I recognize that results over the past two quarters have been unacceptable, but we are confident in AIG's future."
|
This confidence may be shared by the board, who believe Willumstad ‘s "broad managerial and financial services experience makes him the right person to lead AIG through today's turbulent markets, drive further organizational change and rebuild shareholder value in the years ahead," but there is at least one shareholder who is not as confident. Former CEO Maurice R. "Hank" Greenberg, who was replaced by Sullivan in 2005 after accusations of fraudulent accounting practices by New York's former Attorney General Eliot Spitzer, remains the company's largest shareholder. He believes company management is to blame for the financial struggles and wrote: "AIG is in crisis" in a May regulatory filing. AIG isn't the only company to take this kind of action in response to the effects of the credit crisis, however, as financial institutions including Merrill Lynch (MER: Charts, News, Offers) and Citigroup have also given their CEOs the boot. Whether or not Willumstad will be able to change the tide remains to be seen, but AIG's stock price was trading slightly higher this morning.
|
Profile |
Click here to view a detailed profile of AIG.
|
|
|
|
|
