AIG CEO Benmosche has cancer

By Ben Berkowitz and Paritosh Bansal

NEW YORK (BestGrowthStock) – American International Group said on Monday Chief Executive Robert Benmosche has cancer and an unclear prognosis, casting a shadow on the bailed-out insurer as it undergoes a restructuring.

AIG did not disclose what kind of cancer Benmosche, 66, has but said he is undergoing “aggressive chemotherapy.” He is thought to have been recently diagnosed, although it is not clear exactly when. Benmosche said in a statement he felt fine and that he had started the chemotherapy last week.

The insurance company has had four chief executives since mid-2008. That turnover is evidence of the turmoil the company has faced after massive derivative positions forced it to receive more than $180 billion of U.S. government support.

In recent months AIG’s outlook has improved. In September, the company came up with a plan to pay back the roughly $100 billion that it still owes U.S. taxpayers.

On Friday, AIG sold $17.9 billion of shares in AIA, its Asian life insurance arm, bringing the company a step closer to repaying the United States.

“Had this happened three or four months ago it would have occasioned more fright for a path forward for the organization,” said Clark Troy, an analyst at Aite Group.

“Now I think it’s more of a question of finding the right person and concern for Benmosche personally.”

Benmosche said his long-term prognosis would not be clear until he had a couple more months of treatment.

The U.S. Treasury Department said it was informed about Benmosche’s health earlier on Monday.

In a letter to AIG employees, Benmosche said he intended to maintain a normal schedule and to work until his intended retirement in 2012.

The company’s stock edged lower to $40.80 in thin after-hours trading from a $41.10 close on the New York Stock Exchange. The stock is up 37 percent this year, against a gain of 11.5 percent for the S&P insurance index.

“Investors should be worried about this. He’s going to keep working while he’s getting chemotherapy. Most people wouldn’t find that very tenable,” said Sean Egan, principal of Egan-Jones Ratings Co, which rates AIG’s debt.

“Keeping him in place might be reasonable in the short-term, but I question if it’s in the company’s longer-term interests,” Egan said.

AIG said it was engaged in contingency planning in case Benmosche needed a substitute.

The board was planning a conference call on Wednesday to discuss succession, the Wall Street Journal reported. A director might step in as interim CEO if Benmosche had to stop working temporarily, WSJ said on its website, citing unnamed sources.

WSJ said AIG Chairman Robert “Steve” Miller, and directors Douglas Steenland and Ronald Rittenmeyer would be among possible candidates for interim CEO.

An AIG spokesman declined to comment.

Aite Group’s Troy said a new permanent CEO would likely have to come from within the organization, given the complexity of challenges AIG faces.

Who that might be is far from clear, however, as Benmosche is the sole executive face of the organization. One potential candidate is executive vice president Peter Hancock, who oversees finance and risk and who joined AIG earlier this year. He has been cited in various reports as a possible successor.

UBS analyst Andrew Kligerman, however, said Jay Wintrob, chief executive of SunAmerica Financial Group, is a strong candidate. SunAmerica is the domestic life business of AIG.

“Jay Wintrob is the guy,” Kligerman said. “He has got the corporate and operational talents to do the job.”

AN AUTHORITATIVE PRESENCE

Benmosche has been an authoritative presence at the insurer since becoming CEO in August 2009.

He has gotten much of the credit for a turnaround that included selling foreign life unit ALICO at an attractive price to MetLife and sorting out the mess surrounding the failed sale of Asian unit AIA to the U.K.’s Prudential.

In July, Benmosche won a boardroom battle with former Chairman Harvey Golub over the failed AIA sale. Reports indicated Benmosche had threatened to resign if Golub was not replaced.

It was the second time the former MetLife CEO had threatened to quit, the first being in November 2009 in frustration over government imposed pay limits on AIG staff.

“It’s a viable, ongoing entity now. Benmosche deserves kudos for his excellent work,” UBS’ Kligerman said. “Now somebody with some more operational skills could certainly take on the role.”

(Additional reporting by Dan Wilchins; editing by Gary Hill, Bernard Orr, Andre Grenon and Carol Bishopric)

AIG CEO Benmosche has cancer