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Will Willis' 'Twofer' End Up A Bad Deal?

NEW YORK ( TheStreet) -- After two years of sitting in the dark, former American International Group (AIG - Get Report) CEO Martin Sullivan, who oversaw the loss of $94 billion in shareholder value at that insurance giant, is moving back into the spotlight.

On Wednesday, the $5.2 billion insurance brokerage Willis Group Holdings (WSH - Get Report) announced Sullivan's appointment as both deputy chairman of the broader firm and head of its global division. The new role puts the 56-year-old insurance titan in charge of the same type of business that brought AIG to its knees.

Joe Plumeri, chairman and CEO of the London-based firm, was enthusiastic about Sullivan's arrival.

"We get a twofer here," Plumeri said on a conference call Wednesday morning. "We are paying him once, but we get a twofer."

Willis management explained that they needed someone who can tie together the firm's diverse global business lines to offer an array of products and services to large, multinational firms. They'd like Sullivan to deliver results "in a very bespoke manner to the truly global companies, the Global 500s," said Willis Group President Grahame Millwater.

Plumeri pointed out that the large accounts within Willis Global Solutions face "a world that is fraught with risk today." Sullivan will be charged with helping them "mitigate those risks."

In that regard, he's an odd choice.

During his few years at AIG, Sullivan managed to plunge the company so far into risk that it ultimately required a $182 billion bailout from the federal government, the largest for any individual company during the financial crisis. When he left the insurance giant, it had nearly 300 individual companies within it , with dozens of subsidiaries. His work in tangling them together and building a complex book of derivatives represents the Gordian knot that AIG has spent the last two years attempting to unwind.

Sullivan didn't say much on the call, nor has he said much since departing AIG in the summer of 2008, a few months before it nearly collapsed.

During his first year as chairman and CEO of AIG in 2005, Sullivan grew the financial products division to represent 10% of revenue and 28% of operating income, from 8% and 15% the previous year. From there it declined and by the time he left in 2008, AIGFP posted a $40.8 billion operating loss.

There are correlations between Sullivan's experience at AIG and the business he is tasked with leading at Willis.

Last year, Willis Group brought in $3.2 billion in revenue and $694 million in operating profit. The global division is the smallest of Willis' three main silos, but also the most profitable. It brought in about 26% of revenue, with and 37% of the bottom line. The main driver of those earnings was Willis Capital Markets & Advisory, a newly formed segment of Willis, which operates in similar areas as AIGFP.
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