Insurance and the Greenbergs: Like Father, Like Sons
The family rules insurance. That worries some people
It started out as a tribute to Maurice R. "Hank" Greenberg, the 73-year-old chief executive of American International Group Inc. But the focus of a recent industry awards dinner quickly turned to the insurance titan's sons, Jeff and Evan. "We should probably recognize him as Insurance Father of the Year," quipped Robert Clements, chairman of the College of Insurance.
With Evan, 44, poised to succeed Greenberg as AIG's CEO and with Jeff, 47, named to head the world's largest insurance brokerage, father Hank has accomplished more than building a global behemoth with $194 billion in assets. He has also created one of the more powerful family dynasties around. The story of how the fiercely ambitious Hank worked his way up from modest farm-boy roots to turn AIG into a financial services powerhouse is a legend within the industry. Less well known are his two sons, who have forged their own insurance careers. Jeff is the Ivy League-educated elder son who was heir apparent at AIG before he walked out in 1995, days after his younger brother was promoted to equal rank. Evan is the onetime wild child who hit the road for three years after prep school, thumbing his way around the country, only to rejoin the family fold.
Now, with Jeff's appointment as president of New York's Marsh & McLennan Cos., the world's largest insurance brokerage, and Evan's position as president of AIG, also in New York, the brothers are sitting at the helm of two industry giants that rely heavily on each other for business. Jeff's company takes in about one-third of the country's brokerage revenues and negotiates with AIG and many other insurers to arrange coverage for its clients. It funnels a huge share of business to AIG, one of its biggest sources for policies."UNCOMFORTABLE." As a result, Jeff's rapid ascent has raised eyebrows among customers and competitors, who worry that Marsh & McLennan might, for example, push AIG's policies at the expense of rivals'. Publicly, many industry leaders say that competition should prevent abuses. But privately, some are concerned about the clout of the Greenberg clan in an industry where lots of people know each other and often work together. Nobody, however, is eager to confront Hank, a blunt, aggressive man who wields huge influence. Even to raise the issue, some rivals say, is to risk losing Greenberg business. As one large competitor explains: "It's uncomfortable, but what can we do?"
Others are also not completely comfortable with the Greenbergs' power. "For starters, you have the appearance of a conflict of interest," says corporate-governance expert Nell Minow, a principal at Lens Investment Management, a money-management firm. Several also question whether Hank's second son is the person best suited to lead the company. As one state pension-fund manager and AIG investor puts it: "Evan wouldn't be our choice, but at least his dad's in good health." And many AIG executives say privately that Jeff's departure has been a loss to the company. "He was a real creative force," says one high-level manager. "I'm not sure about Evan." Both Jeff and Evan declined to comment, and Hank will only say: "They're both good guys."
Still, industry executives can't help wondering how AIG will fare once the patriarch steps down. "I don't think anybody can replicate what Hank has done," says Bob Stein, national director of financial services at Ernst & Young. But for now, Hank isn't going anywhere--and that suits investors. AIG's share price has soared 45% in the past year. In 1998, net income rose 13%, to $3.8 billion, on revenue of $33 billion. Hank himself owns 2.45% of AIG's shares outright--and the Greenberg clan indirectly controls much more through holdings in three private entities that hold a combined 22% of AIG.ODD JOBS. Different as they are, both sons will play major roles in the insurance industry long after their father finally retires. The methodical Jeff was always "the dutiful son," according to his former wife, Nikki Finke, now the West Coast editor of New York magazine. He graduated from Choate and Brown University, then went straight to Georgetown University Law School. Trying hard not to be a typical rich kid, he pumped gas and bagged groceries, though he used the money to buy an Alfa-Romeo sports car.
Evan, by contrast, started out as the rebel. But after bumming around the country while picking up odd jobs for three years, the cash-strapped youth eventually joined the family business in 1975, processing auto-insurance policies for an AIG subsidiary in Denver. He has stayed with the company ever since. "Early on, the Greenbergs despaired that Evan would ever amount to anything," says Finke.
Jeff, meanwhile, went to work in 1976 as a broker at Marsh & McLennan, where he earned a reputation for being bright and hardworking. "I think he could have succeeded in any business," says Michael P. Esposito, chairman of Exel Ltd., a longtime business associate.
Two years later, Jeff quit to join AIG. Spending the next 17 years moving through various parts of the company, he made his biggest mark beginning in 1988, as head of the National Union Fire Insurance Co., AIG's leading property-casualty operation. There, he built up corporate coverage for company directors and officers. In 1991, he was named executive vice-president for domestic brokerage operations, where he oversaw the development of new products that helped large clients hedge against everything from currency risk to weather fluctuations.
But Jeff abruptly quit in 1995, following Evan's third promotion in less than 16 months--and his rise to equal rank in the company. Those close to Jeff cite the stress of living up to his father's expectations and watching his brother suddenly become a rival. "Evan was somewhat of a surprise because of his background," says John Waterman, managing director of investments at Rittenhouse Financial Services Inc., a major AIG shareholder. As one Marsh & McLennan executive puts it: "I don't think anyone, and especially Jeff, ever thought that Evan was in the game."
Truth was, though, that Evan had been quietly carving out a career in AIG's personal-accident business, and later in its overseas operations. Sent to Japan in 1991, Evan became chief operating officer and later, at age 36, CEO of AIG's booming Tokyo-based Japanese and Korean business. He spent the next three years building some of AIG's most important foreign markets. Co-workers remember him as a friendly but feisty guy, with the same entrepreneurial instincts as Hank.LACKLUSTER? Still, Evan's performance over the years did little to set him apart within the intensely competitive culture of AIG. Says one industry executive who has worked with him: "He's no better than 1,000 other guys over at AIG, but that's still better than most." What's more, he has kept a remarkably low profile, with almost none of the public appearances or industry hobnobbing that one might expect from the No. 2 guy at AIG. Ever since Jeff's departure, though, Evan has gained increasing support from Hank Greenberg, who named him president and chief operating officer in 1997.
Meanwhile, soon after Jeff left AIG, his old employer lured him back. "He was doing so well at AIG that we just assumed he would be unavailable," says Clements, a former Marsh & McLennan president, who praises Jeff's technical skills and industry knowledge. Since joining Marsh & McLennan, Jeff has expanded AIG's Trident Partnership unit, a $667 million equity fund that invests in insurance-related industries. He was also a key player in negotiations to acquire rival broker Sedgwick Group PLC in November, 1998. "Jeff has brought a wealth of industry contacts," says Salomon Smith Barney analyst Ron Frank.
Now, it's up to Hank and Evan to keep the AIG juggernaut going. But, as the head of the nation's most powerful broker, Jeff won't be too far away. Indeed, executives at both AIG and Marsh & McLennan say that any hard feelings between the Greenberg sons have since been patched up. That should make dad happy, ensuring the Greenberg dynasty will go on for years to come.By Diane Brady in New YorkReturn to top