May 12, 2008

Former CEO asks AIG to postpone annual meeting

By KRISTEN A. LEE

The Associated Press

Maurice R. Greenberg, the former chief executive and largest individual shareholder of AIG, says the insurer is 'in crisis' and urged it to postpone its annual meeting in the wake of its massive first-quarter loss, according to regulatory filing Monday.

In a letter to American International Group Inc.'s board dated Sunday, Greenberg said he and other top shareholders are deeply concerned 'about the persistent and seemingly endless destruction of value at AIG.' He said the leadership of the world's largest insurer has also lost credibility with the investment community.

'AIG is in crisis,' Greenberg wrote.

'The company's problems are more than financial and extend far beyond its subprime credit exposure or approach to capital management,' he said in the letter. 'Core businesses are also deteriorating.'

AIG spokesman Chris Winans said the board received Greenberg's letter Monday morning but sees no need to postpone the annual meeting, which is scheduled for Wednesday.

AIG said Friday it lost $7.81 billion, or $3.09 per share, in the first quarter. The company also announced plans to raise $7.5 billion in an offering of common stock and equity units and another $5 billion through high equity fixed-income securities to shore up its capital base.

AIG late Monday said it increased the $7.5 billion offering to $11.9 billion.

The company priced about 171 million shares of common stock at $38 per share, for a total of $6.5 billion. It also said it would sell 72 million equity units for $5.4 billion. The equity units consist of subordinated debt securities and contracts that require the holders to purchase AIG stock later.

Greenberg said New York-based AIG has not explained why it chose to raise funds in the capital markets rather than pursuing other options, such as divesting noncore assets or seeking other sources of funding.

'Shareholders deserve to know how this decision was reached and what other alternatives were considered and evaluated,' Greenberg wrote. He also questioned AIG's decision to increase its dividend by 10 percent, to 22 cents per share.

AIG shares dropped $1.91, or 4.7 percent, Monday to close at $38.37, their lowest point since October 1998, following a downgrade from Goldman Sachs. Shares slipped another 14 cents in after-hours electronic trading.

Greenberg was forced out of the company in 2005, when then-New York State Attorney General Eliot Spitzer accused him of fraudulent accounting.