AIG CEO: Shareholders Count, Too

For the first time since AIG's bailout, management told investors that the firm plans to live up to all its commitments -- including those to common stockholders.
Author:
Publish date:

NEW YORK (

TheStreet

) --

American International Group

(AIG) - Get Report

CEO Bob Benmosche said the firm is committed to living up to its obligations to shareholders - the first time management has explicitly indicated support for equity investors since the firm took on enormous obligations to the government in September 2008.

AIG is committed to "meeting all - all - of our obligations to all constituencies and stakeholders of this institution," Benmosche said at the firm's annual meeting on Wednesday.

"The key is to make sure we have shareholder value at the end of the day," he later added, noting that AIG wants to ensure that it keeps commitments to "all constituents, including shareholders."

AIG CEO Robert Benmosche

When asked how likely it is that shareholders will be repaid or see a return on capital, however, Chairman Harvey Golub stepped in to tone down Benmosche's statement. He noted that AIG must first live up to its commitments to taxpayers and other debt holders before equity investors can be considered.

When the firm was first bailed out, conventional wisdom said shareholders might be wiped out entirely. But clearly, prospects have changed since Benmosche took the helm last August. Its stock has ranged from $8.22 to $55.90 over the past year, as market sentiment about the firm's future has brightened. By around noon on Wednesday, AIG shares were trading 1.3% lower, at $42.32.

Notably, AIG reported its first quarterly profit attributable to shareholders last week for the first time since 2007. The government still holds an 80% stake in the firm via a massive preferred-stock investment that the insurer used to meet its obligations at the height of the financial crisis. Since then, AIG has made tremendous progress in

winding down its enormous derivatives exposure, shedding non-core entities and formulating plans to begin repaying taxpayers.

AIG now owes roughly $70 billion, down from $180 billion at the height of its bailout. AIG reduced its debt by trimming federal credit lines and issuing equity stakes in firms it plans to divest. The firm has

reportedly hired a financial adviser to help structure the actual debt repayment process.

Yet because AIG has not started repaying funds -- or paid the quarterly dividends and interest it owes on taxpayer debt -- the government was able to elect two special directors to its board, Donald Layton and Ronald Rittenmeyer. The other AIG-nominated directors, including Benmosche and Golub, were also elected without incident.

Golub gave special thanks to

Dennis Dammerman, who retired earlier this year, citing an undefined illness, as well as former CEO Edward Liddy, who took the reins of AIG directly after the bailout.

"Ed Liddy in particular deserves a special word of gratitude for leading AIG ... in especially trying circumstances," Golub said.

Liddy resigned after less than a year, having faced torturous sessions before Congress amid widespread public anger over AIG's bailout and hefty bonuses. Some also criticized him for caving into political demands and rushing to sell AIG's assets for less than they were worth. Benmosche, who took over from Liddy, reassessed items on the chopping block and has made a special point of saying he will get fair value for any assets that are divested.

Among other notable comments at the meeting were Golub's support of

Goldman Sachs

(GS) - Get Report

and his knock on the

New York Times

, which has recently written unfavorable stories about the two firms' relationship. When asked by a shareholder whether AIG had exited certain relationships with Goldman, as the

Times

reported, Golub didn't answer directly, but replied with deference to Goldman and disrespect to the

NYT

.

"Goldman is a fine firm and does lots of things extremely well," he said, adding that when Goldman can be of service to AIG, "we will go with them.

"You might want to try reading other publications, like the Wall Street Journal or the FT," he quipped.

AIG shares were off 11 cents to $42.78 in midday action on volume of 7 million.

-- Written by Lauren Tara LaCapra in New York

.