Wednesday, June 18, 2008


Interesting news today, from CNBC:
American International Group CEO Martin Sullivan stepped down from his post, as expected, after growing discontent among the board and shareholders with his management of the insurance giant.…Sullivan has come under intense criticism since AIG recently announced billions of dollars in writedowns from losses after Sullivan and the company assured investors the writedowns would be minimal.

This is another example of where a good ERM study would have exposed the asset weakness. As The Economist writes:
Mr Sullivan did himself no favours by mismanaging expectations. He and his team poo-pooed critics, insisting until this year that AIG had oodles of excess capital and that its actual (as opposed to mark-to-market) losses would be modest. The firm has since been forced to admit that its accounting models were too optimistic, after its auditors found “material weaknesses” in them

Perhaps an outside analysis of the capital model may have been a good idea?