a securities trading firm you mark to market every day and you should. But if I’m running a life insurance company and I have just sold a policy and it's got a 3% assumed rate of interest and I go out and buy a bond that’s 41/2% interest and I match it and I put it in the vault and say I’m going to keep that bond to maturity, that policy. What do I care if it sells higher or lower during the time that I’m on risk? I matched my asset and liability and I’m going to hold it to maturity. I don’t care if it sells higher or lower. I’m not going to sell it. So why would you have to mark to market every quarter, every year? It doesn’t make any sense.
An accounting principle doesn’t necessarily apply to every industry. It makes no difference what industry you’re in, whether it’s the financial industry or manufacturing or whatever. I think you have to be more thoughtful about that--at least that what I have found, in arguing along with Howie Smith, the accounting principles board or the International Accounting --- whatever they call that organization that was trying to standardize accounting worldwide.
Insurance was always the odd man out. They would come to me and one of the members was from Australia and said how do you handle 10-year automobile policies? I said we don’t. We don’t write them. I don’t know anybody who writes a 10-year automobile policy. He couldn’t understand that. But we don’t. We don’t do it and I can’t find anybody in the United States that does. They used to do it in Italy about 25 years ago. That’s about the only place. So the ignorance about insurance of some of the accounting professionals is fairly deep.
MANAGEMENT
DANKWA: I’m going to wind down this conversation but go through a list of individuals and talk a little bit about them. Specifically Ed Liddy, what do you think about the job he’s doing?
GREENBERG: I’m not going to talk about individuals. Ed Liddy ran Allstate and I think he did probably a pretty good job of that. So he’s familiar with insurance but AIG is not Allstate. It’s in 130 countries. Allstate’s in the United States. It’s a different business and a different kind of company. It’s like saying I’m a brain surgeon but I’ve been asked now to operate on somebody’s legs. It’s a little bit different skills you need in trying to run a company that’s different than the one you ran before. You may grow to the job but there’s time, how much time do you have to grow to the job?
DANKWA: I’m not saying talk about those individuals but just some of the things that have come out about them. One issue: Andrew Cuomo freezing Martin Sullivan’s compensation. What’s your feeling about that?
GREENBERG: I think that compensation ought to be totally recovered.
DANKWA: He doesn’t deserve it?
GREENBERG: I do not believe that you’re entitled to a golden parachute for aiding and abetting the destruction of a company.
DANKWA: AIG recently announced that Paula Reynolds and Richard Booth who ran HSB [Hartford Steam Boiler, an AIG subsidiary] for a long time are going to manage this transitional period. What do you think about that? Is that a structure Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7