NEW YORK, Sept 17 (Reuters) - When he left Citigroup Inc in 2005, Robert Willumstad said he wanted to run a publicly-traded financial services company. He got that chance, as chief executive of American International Group Inc (AIG.N).
For three months.
Willumstad will lose his job at the helm of AIG, according to a person briefed on the matter, in connection with the U.S. government’s $85 billion rescue package for the giant insurer.
He will be replaced by Edward Liddy, a former chief executive of the insurer Allstate Corp (ALL.N), said another person briefed on the matter.
Neither AIG nor Willumstad was immediately available for comment.
AIG on Tuesday received a two-year loan of up to $85 billion from the U.S. Federal Reserve so it can pay its bills, and sell assets with what the central bank called the “least possible” disruption to the broader economy. [ID:nHKG15677]
The U.S. government will take a 79.9 percent equity stake in AIG, which has about $1.05 trillion of assets and employs 116,000 people in well over 100 countries.
AIG was once the world’s largest insurer by market value, but lost that crown as it amassed $18 billion of losses over three quarters, tied to complex securities whose value plunged as the nation’s housing crisis deepened.
Willumstad had planned to announce on Sept. 25 a plan to restore AIG to health. But he was caught flat-footed by a mushrooming panic about AIG’s capital and credit ratings.
AIG’s situation became bleaker after weekend talks failed to avert a bankruptcy of Lehman Brothers Holdings Inc LEH.P and leading credit rating agencies downgraded AIG. That triggered a potential $20 billion of obligations.
“The rating agencies today are the governor of how much capital we have and how much capital we need,” Willumstad said, presciently, on an Aug. 7 conference call.
It was not immediately clear how much severance Willumstad might get. He was eligible for AIG’s executive severance plan, which provided benefits based on salary and bonus levels, and continued vesting of some incentive awards and benefits.
When he became chief executive, Willumstad was awarded a $1 million annual salary, and a possible $21 million in annual bonus and incentive awards. He also got restricted stock and options once valued at $36.5 million.
AIG’s bailout derailed what was to be a culmination of a successful four-decade career in financial services for the soft-spoken Willumstad.
The Brooklyn, New York native’s reputation for being measured contrasted with that of Maurice “Hank” Greenberg, who ran AIG for nearly four decades and has been a thorn in the side of subsequent management since his 2005 ouster.
“The only concern that you have expressed to me is the fear that if I were to become an advisor to the company that I would ‘overshadow’ you,” Greenberg wrote to Willumstad earlier Tuesday.
Following 20 years at the former Chemical Bank, Willumstad decamped in 1987 to Commercial Credit Co, a small Baltimore lender led by Sanford “Sandy” Weill.
Willumstad spent nearly two decades helping Weill build Commercial Credit through mergers and acquisitions into what in 1998 became Citigroup (C.N), where he would run the global consumer group.
But in 2003 he lost out to Charles Prince to become Weill’s successor, settling for the role of chief operating officer. Two years later, he left.
The next year, he would become AIG chairman, and in June 2008 he replaced Martin Sullivan as chief executive, after mortgage losses had already caused AIG shares to fall by half.
Willumstad in a June 15 interview called himself “a very young 62”, and said he planned a long career at AIG, perhaps lasting as long as Greenberg, who was nearly 80 when he left.
He won’t get that chance. In concluding his Aug. 7 conference call, he said: “We look forward to seeing you in September.”
He won’t have that chance either. (Additional reporting by Lilla Zuill; Editing by Louise Heavens)