October 1, 2008 / 4:28 PM / 10 years ago

UPDATE 2-N.Y. would consider Greenberg bids for AIG units

(Adds details in paragraphs 11-20, adds byline)

By Jessica Hall

PHILADELPHIA, Oct 1 (Reuters) - New York Insurance Superintendent Eric Dinallo, charged with overseeing any sales of American International Group Inc’s (AIG.N) insurance units, said on Wednesday he would consider bids from former AIG CEO Maurice Greenberg.

Greenberg, in a letter to AIG CEO Edward Liddy on Monday, said he would like the chance to bid on assets that are to be sold as AIG seeks to quickly repay an emergency loan of up to $85 billion from the federal government.

“He would be received and evaluated as any other suitor,” Dinallo told reporters after addressing an insurance conference in Philadelphia.

“He still has some open issues,” Dinallo added, alluding to outstanding civil charges against Greenberg.

Even so, Greenberg is not “explicitly disqualified from ownership,” he said.

Greenberg left AIG in 2005 following an accounting scandal. He has denied any wrongdoing.

Until recently, Greenberg was AIG’s controlling shareholder, through personal stakes and shares owned by investment firms he runs — C.V. Starr and Starr International Co Inc.

In recent days, Greenberg has been selling AIG shares, cutting his AIG stake to below 10 percent, which gives him more flexibility under New York insurance law.

Dinallo said C.V. Starr would also have to be evaluated by state regulators if it wanted to bid for AIG insurance units.

    The bailout of AIG gives the government the right to take a 79.9 percent stake in the insurer.

    “AIG was not an insurance company,” Dinallo said during a speech to the National Association of Mutual Insurance Companies. “More than 50 percent of the company was financial services.”

    “What brought down the company was not short-selling. What killed this company was what we chose not to regulate,” Dinallo said, referring to the non-insurance, unregulated side of AIG.

    AIG, under pressure to raise funds to pay off the federal loan, will need regulatory approval before selling off any insurance units.

    The company agreed to the $85 billion federal bailout, which carries heavy interest and fees and must be repaid within a two-year term. Analysts have said AIG would likely have to sell off some of its most valuable assets, including a highly-profitable aircraft leasing arm, and some insurance units.

    Liddy, who was named to the CEO post as part of the federal bailout, has said he plans to quickly raise funds through asset sales but hopes to hold on to as many of the insurance operations as he can.

    Dinallo told reporters after his speech, “I want to facilitate Ed in what he wants to do. He clearly has a game plan. Liddy has not been brought in as a liquidator.”

    Dinallo said he expects AIG to move away from the financial services business and go back to its core insurance operations.

    “AIG went against its core competencies of insurance. They will likely sell some insurance assets — there’s scores of insurance assets all over the world he (Liddy) could consider.”

    AIG has already received bidding inquiries from “top-tier companies,” Dinallo said, without naming any potential suitors.

    “Ed has been given time to not engage in a fire sale of assets,” Dinallo said. (Reporting by Jessica Hall in Philadelphia, writing by Lilla Zuill in New York; editing by John Wallace)

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