AIG Replaces Chief Investment Officer

American International Group Inc. has replaced its chief investment officer, the company said.

Monika M. Machon was named AIG senior vice president and chief investment officer, responsible for insurance company portfolio management across all asset classes.

She succeeds Win Neuger, who is retaining his position as chairman and chief executive of AIG Investments, which manages client assets, said AIG spokesman Joe Norton.

“He’ll be leading the management team of the external client asset management business that AIG intends to sell,” Norton said. He would not comment about what Neuger’s status will be when the business is sold.

Machon will report directly to AIG Chairman and Chief Executive Officer Edward J. Liddy. Machon joined AIG (NYSE: AIG) in 1998 and is presently the global head of Fixed Income for AIG Investments and serves as chairwoman of the board of AIG Investments Europe Ltd.

AIG Investments operated AIG’s securities-lending program. That program became one of the major cash flow problems that forced the insurer to the edge of bankruptcy in September, when the federal government stepped in with a rescue plan that has grown to $150 billion. AIG is selling assets to help replay loans from the rescue plan.

In addition, Jeffrey J. Hurd, who is AIG Investments senior managing director, chief administrative officer and general counsel, has been named senior vice president and head of asset management restructuring, responsible for the sale of AIG’s external asset management business and the restructuring of AIG’s asset management function. He will report to AIG Vice Chairwoman Paula R. Reynolds. Hurd will retain his current responsibilities prior to the sale.

AIG Investments invested much of the collateral it received for lending securities in residential mortgage-backed securities, for which there is no market and which have declined sharply in value, forcing AIG to return cash to counterparties.

The New York Federal Reserve Bank loaned a financing entity, created as part of the revamped rescue plan approved in November, $19.8 billion, to which AIG added more than $6 billion, to settle outstanding transactions and terminate the securities-lending program (BestWire, Dec. 16, 2008).

AIG Investments also laid off 7% of its worldwide work force (BestWire, Dec. 16, 2008).

Most insurance subsidiaries of AIG have a current Best's Financial Strength Rating of A (Excellent) with a negative outlook.

AIG shares were $1.40 in afternoon trading on Jan. 20, down 0.70% from the previous close.

(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest.com)