Archive for March, 2011

AIG names new boss at property casualty unit

Thursday, March 31st, 2011 | Finance News

NEW YORK – The insurer AIG, the recipient of a huge government bailout during the 2008 financial crisis, named a new CEO and management team for its Chartis global property casualty business on Thursday as part of a reorganization of one of its main business units.

American International Group Inc. said Peter Hancock, executive vice president of risk and investments, would replace Kristian Moor as CEO of the Chartis insurance unit. Moor has been with AIG for more than 30 years and will become the unit's vice chairman.

The restructured Chartis will be divided into commercial and consumer groups with supporting claims and underwriting blended into these two operations.

John Doyle, previously CEO of Chartis U.S., will run the global commercial business. Jeffrey L. Hayman, currently Chartis' chief administrative officer, will lead the global consumer business.

AIG nearly went under during the 2008 financial crisis. It had written insurance on the value of hundreds of billions in mortgage investments held by financial institutions. When the investments lost value, AIG could not afford to make good on its contracts. It took government help to stay out of bankruptcy.

The insurer received a bailout package with a total value of $182 billion. The government got a 92 percent stake in the company and hopes to start selling the shares soon to help recoup its money.

AIG is also selling assets to repay the government. Since 2008, AIG has sold 33 businesses and raised more than $57 billion in cash and securities. Last year alone, AIG raised more than $37 billion in cash and securities, primarily by selling two international life insurance divisions.

In February, the company announced an addition of $4.2 billion to loss reserves at Chartis. The performance of Chartis is considered a key to the successful sale of AIG shares by the government.

AIG shares fell 95 cents, or 2.6 percent, to $35.10 in midday trading.


Sokol affair casts shadow on Buffett style

Thursday, March 31st, 2011 | Finance News

NEW YORK (Reuters) – So much for Warren Buffett's philosophy of leaving his managers alone.

A key Buffett lieutenant resigned this week, and said he bought shares in a company he later pitched to his boss. While Buffett said his employee, David Sokol, did nothing unlawful, governance experts said the entire episode was a black mark for a company that has long prided itself on its rectitude.

"It's the kind of behavior that, as a matter of corporate governance, sophisticated companies try to avoid," said John Coffee, a law professor at Columbia University.

Experts said that part of the problem may be that Buffett's company, Berkshire Hathaway, prides itself on having few of the internal controls that other major companies have, and instead banks on the honor of its senior employees.

"The key is the people. That's been his playbook ever since he's started. He knows the rules, and he expects the people he works with to know them too," said Michael Holland, chairman of Holland & Co, which oversees $4 billion in assets and owns Berkshire shares.

Changing the way he runs his business would sting for Buffett, who bets everything on his reputation -- something he made crystal clear in a July 2010 memo to his managers that he released this past February.

"We can't be perfect but we can try to be. As I've said in these memos for more than 25 years: 'We can afford to lose money -- even a lot of money. But we can't afford to lose reputation -- even a shred of reputation.'"

He added: "We must continue to measure every act against not only what is legal but also what we would be happy to have written about on the front page of a national newspaper in an article written by an unfriendly but intelligent reporter."


Buffett likes to brag about the way he runs companies -- by not running them, leaving them instead in the care of what he considers capable executives who do not need his oversight.

"There are managers to whom I have not talked in the last year, while there is one with whom I talk almost daily. Our trust is in people rather than process. A 'hire well, manage little' code suits both them and me," Buffett said in his annual shareholder letter in February.

Ultimately, by his own admission Buffett is not an operational leader, but a sort of inspirational one. He contents himself to let others run the businesses.

Investors say in this case, he may have picked the wrong person to help him lead.

"If I had any knock against Buffett, is how much he espoused his successor, how this was the right guy, how much he rallied the flag around him as his successor ... and now this guy is gone," said Matt McCormick, portfolio manager at Cincinnati-based Bahl Gaynor Investment Counsel.

(Additional reporting by Dan Wilchins, Jonathan Stempel and Maria Aspan in New York and Sarah Lynch in Washington, editing by Matthew Lewis)


Gates: No ground troops while ‘I am in this job’

Thursday, March 31st, 2011 | Finance News

WASHINGTON – As the U.S. debates its future role in the Libyan conflict, Defense officials slammed the brakes on any broad participation Thursday, with Defense Secretary Robert Gates saying there will be no American ground troops in Libya "as long as I am in this job."

Under withering congressional probing and criticism of an ill-defined mission to aid a rebel force that officials know little about, Gates and Joint Chiefs chairman Adm. Mike Mullen sketched out a largely limited role for the U.S. military going forward, with Gates saying some other country could train the rebels trying to oust strongman Moammar Gadhafi.

"My view would be, if there is going to be that kind of assistance to the opposition, there are plenty of sources for it other than the United States," said Gates. "Somebody else should do that."

Asked by one lawmaker whether the U.S. involvement might inevitably mean "boots on the ground" in Libya, Gates replied, "Not as long as I am in this job."

The U.S. turned over control of the military operation to NATO Thursday, just hours before Gates and Mullen told Congress that future U.S. participation will be limited and will not involve an active role in airstrikes as time goes on.

They were unable; however, to answer key questions from clearly agitated lawmakers about the length of the operation and how it will play out if Gadhafi does not relinquish power.

The U.S. goals are unclear and officials don't know who the rebels are, said Rep. Mike Turner, R-Ohio, adding that if it came to a vote he would not support U.S. involvement in the operation.

He and others repeatedly complained that Congress has not been consulted on the Libya operation, and chafed that the legislative branch is not willing to be a backseat driver.

Gates and Mullen insisted that Libyan leader Moammar Gadhafi's military has been degraded by as much as 25 percent, but Mullen noted that regime forces still outnumber the rebels by about 10-to-1.

Meanwhile, they said the opposition groups are fractured and operating independently city by city, and just 1,000 of the rebels are militarily trained.

Their comments came as Gadhafi's forces struck forcefully back at the rebels this week, recapturing lost ground and triggering pleas for help from the battered and failing opposition forces.

Gates said that he believes political and economic pressures will eventually drive Libyan leader Gadhafi from power, but the military operation will help force him to make those choices by degrading his defense capabilities.

Gates and Mullen testifed before the House and Senate Armed Services Committees in the wake of new revelations that small teams of CIA operatives are working in Libya.

Gates declined to comment on the CIA activities in Libya.

U.S. officials have acknowledged that the CIA has sent small teams of operatives into Libya and helped rescue a crew member of a U.S. fighter jet that crashed.

The CIA's precise role in Libya is not clear. Intelligence experts said the CIA would have sent officials to make contact with the opposition and assess the strength and needs of the rebel forces in the event President Barack Obama decided to arm them.

Meanwhile, battlefield setbacks are hardening the U.S. view that the poorly equipped opposition probably is incapable of prevailing without decisive Western intervention, a senior U.S. intelligence official told The Associated Press.

The administration says there has been no decision yet about whether to arm the opposition groups, and acknowledged that the U.S. needs to know more about who the rebels are and what role terrorists may be playing there.

Rep. Adam Smith of Washington state, the top Democrat on the House Armed Services Committee, said the U.S. must better explain to the American public that this is not an open-ended conflict and that the U.S. will not become embroiled in a civil war.

Committee chairman Rep. Howard "Buck" McKeon, R-Calif., said he has concerns about U.S. objectives in Libya.

"History has demonstrated that an entrenched enemy like the Libyan regime can be resilient to airpower," McKeon said.


Associated Press writers Adam Goldman and Robert Burns contributed to this report.