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The fallout from the investigations into conflicts of interest and questionable practices in the U.S insurance business spearheaded by New York Attorney General Eliot Spitzer has reached into the board room of one of the world’s largest insurers and accelerated the retirement of a man many consider the industry’s most influential executive, Maurice “Hank” Greenberg, chief executive officer and president of American International Group.

On March 14, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ announced that Greenberg, who has been at ÌìÃÀÍøÕ¾´«Ã½´«Ã½ for 40 years, would retire and that its board elected Martin J. Sullivan as president and chief executive officer to succeed him. Greenberg will serve in the capacity of non-executive chairman.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ has also announced that the filing of its 2004 annual report (Form 10-K), which is due on March 16, 2005, will be delayed. During a conference call with analysts, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ officials said they hoped to have it ready within two weeks.

The company’s shares fell 1.3 percent to $63.85 on the news of Greenberg’s departure.

The company officials said the annual report delay is the result of the management changes as well as the company’s ongoing internal review of the accounting for certain transactions, which review was commenced in connection with previously announced regulatory inquiries. The company does not believe that any of the matters subject to the review are likely to result in significant changes to the company’s financial position.

Sullivan, who has served in a variety of senior positions during his more than 30-year career at ÌìÃÀÍøÕ¾´«Ã½´«Ã½, was most recently vice chairman and co-chief operating officer. He said that in his new position Greenberg would be available to consult with him during the transition and “going forward.”

Sullivan handled questions at a morning conference call with analysts at which Greenberg appeared to introduce him. Greenberg said it was “terrific” that the long-time ÌìÃÀÍøÕ¾´«Ã½´«Ã½ employee would be succeeding him.

For his part, Sullivan stressed that he believes the fundamental strategies at ÌìÃÀÍøÕ¾´«Ã½´«Ã½ are sound and that the company will continue to grow under the new management team.

“We had record results in 2004 and we’re off to a good start in 2005,” Sullivan said. “With regard to any regulatory issues, I would like to get these behind us and soon as possible and move forward.”

As part of the management shake-up, Steven J. Bensinger has been elected executive vice president, chief financial officer, treasurer and comptroller. He succeeds Howard I. Smith as CFO, who has taken leave. Bensinger, who joined ÌìÃÀÍøÕ¾´«Ã½´«Ã½ in 2002, had been senior vice president, treasurer and comptroller. ÌìÃÀÍøÕ¾´«Ã½´«Ã½ officials would not elaborate on Smith’s reasons for taking leave at this time.

Citing the management realignment, the departure of CFO Smith, and investigations by Spitzer and SEC, Standard & Poor’s a placed ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s AAA long-term credit rating on credit watch with negative implications, pending release of the company’s annual report.

Fitch Ratings lowered ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s long-term issuer rating and unsecured senior debt obligations to AA-plus from AAA.

Sullivan said he did not expect any downgrades to have serious effect on ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s earnings. “Our internal reviews are underway and we can say with a reasonable degree of assurance that we don’t think it will have any affect on our financial situation,” said Sullivan.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ also announced that the board of directors elected Donald P. Kanak to be executive vice chairman and chief operating officer, focusing on Asia and working closely with Edmund S.W. Tse, senior vice chairman of life insurance. Previously, Kanak was vice chairman and co-chief operating officer.

Frank G. Zarb, chairman of the executive committee of the board, said: “The board deeply appreciates the enormous contributions that Hank Greenberg has made to ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s growth and success over more than 35 years. As a result of Hank’s leadership, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ today is the largest and best capitalized insurance and financial services organization in the world. However, the board has concluded it is now in the best interest of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s shareholders, customers and employees to turn to a new generation of leadership, and we are pleased that Hank Greenberg will assist in the transition.”

Spitzer, the Securities & Exchange Commission and other authorities have been reviewing Greenberg and ÌìÃÀÍøÕ¾´«Ã½´«Ã½ over various issues, including participation in alleged bid-rigging schemes with giant insurance broker Marsh, sales of certain other insurance products and reinsurance transaction. In November, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ agreed to a $126 million settlement with the SEC.

Zarb described the changes as part of a succession plan and praised Greenberg’s successor, Sullivan. “Martin Sullivan’s election follows the plan put in place by the board and the CEO to ensure an orderly transition of senior management. ÌìÃÀÍøÕ¾´«Ã½´«Ã½ has a very strong and deep management team, and Martin Sullivan is a proven leader who will be an outstanding CEO. Martin has a distinguished record of accomplishment at ÌìÃÀÍøÕ¾´«Ã½´«Ã½. He has achieved significant results in several key positions, and he has a deep understanding of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s major businesses throughout its domestic and international operations,” he said.

Sullivan acknowledged the challenge of succeeding Greenberg. “It is a daunting task to step into the shoes of Hank Greenberg. Thanks to his leadership, ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s business units are managed by tested professionals who are leaders in their fields. Also, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ has more than 92,000 hardworking and talented employees around the world, and their continuing commitment will enable ÌìÃÀÍøÕ¾´«Ã½´«Ã½ to keep serving the best interests of our shareholders and customers. We have an extremely strong business and our financial fundamentals remain intact. The company is committed to cooperating with the governmental authorities in their ongoing investigations. We take these matters seriously and want to bring them to resolution.”

Sullivan was elected ÌìÃÀÍøÕ¾´«Ã½´«Ã½ vice chairman and co-chief operating officer in May 2002, when he was also elected to the ÌìÃÀÍøÕ¾´«Ã½´«Ã½ board of directors. He first joined the company in the finance department of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s non-life company in the United Kingdom in 1971.

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