AIG Chairman Steve Miller Intvd on Bloomberg Surveillance

Discussion on finance and banking.

(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)

STEVE MILLER, CHAIRMAN, AIG, IS INTERVIEWED ON BLOOMBERG SURVEILLANCE

JULY 21, 2014

SPEAKERS: STEVE MILLER, CHAIRMAN, AIG

TOM KEENE, BLOOMBERG NEWS

SCARLET FU, BLOOMBERG NEWS

ADAM JOHNSON, BLOOMBERG NEWS

TOM KEENE, HOST, BLOOMBERG NEWS: Steve Miller with us from AIG as well today with this international news. Steve Miller, the key question for me is can sanctions really affect Russian business? Within your international experience, can sanctions work?

STEVE MILLER, CHAIRMAN, AIG: Well, they're very difficult, they've very easy to–

KEENE: Work around.

MILLER: –work around in some ways. It's more of a political statement than a business statement.

KEENE: Within the business statement, well, we'll come back on this. There's so much to talk about. Steve Miller with us from AIG.

0710

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0712

KEENE: Good morning, everyone, Bloomberg Surveillance, I'm Tom Keene. "This Matters Now" to our guest host, Steve Miller of AIG. He's dropped uncountable wrenches on his foot at Ford, Chrysler and Delphi as well. Steve Miller sees consolidation in his auto parts industry and like pharmaceuticals it is much about not paying taxes to Washington.

This is a story percolating beneath the international stories of Ukraine and Israel–Gaza, Americans are seeing corporate tax is it failure? Going abroad. It's happening again, right?

MILLER: Yes, well, I analogize our tax situation for corporate America to being like a fire in the theater. A lot of people are starting to leave. Our politicians want to lock the doors. The real answer would be, let's put out the fire, which means make our US tax system competitive on a global scale.

KEENE: I mean it just builds and builds and builds. The pharmaceuticals and now this is TRW, a name we all know, with a German name we don't know, and they're going to merge so that TRW pays less tax to Washington?

MILLER: Well, that will be the effect of this. Actually, it's newsworthy just as the automotive industry consolidation play. This creates the world's largest auto parts maker. A $40 billion enterprise led by Zed F in Germany. By the way, the Z in the name comes from Zeppelin, going way back a century to the air ships.

KEENE: We're too old. No one younger than us would even know what you're talking about.

MILLER: But in any event, this company will now be larger than the previous leaders, Bosch and DENSO as the global leader in auto parts. That's the big story and it says the automakers want to buy parts from a huge, very capable, financially stable companies. But underneath it all is also a US company will now be leaving the US tax roll.

KEENE: The tax regime as well. But let's carry this over with your cross- industry expertise to an auto parts consolidation. We see Mr. Murdoch wanting to buy Time Warner as well. Is all of this a battle to find revenue growth at the top of the income statement? Is that why we're seeing cross- industry consolidation?

MILLER: Well, I think it is a trend that's restarted now that things have kind of stabilized after the crash of five years ago. That people are starting to look at equity plays of consolidating within certain industries. Auto parts is one, media is another and so on, where sheer size gets you some synergies, gets you some market and pricing power and can make you more successful than private companies would be.

KEENE: Well, Steve Miller with us to look at the synergies of the new paradigm. I'm trying to get every MBA buzz word in here I can. I think synergies for we mere mortals, Steve, is firings and cost cuttings. I think that's what we discuss.

Coming up, we'll get an update on AIG from the Chairman Steve Miller. Also looking through this crisis and much more on Ukraine and the battle in Israel and the Gaza Strip.

0715

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0730

ADAM JOHNSON, HOST, BLOOMBERG TELEVISION: Our guest host is Steve Miller, he is Chairman at AIG. And, Steve, it's very complex a CEO with cancer. There's so much that you have to deal with. How did the board deal with it at AIG?

MILLER: Well, the way every board has to deal with it, the way we dealt with it is first you have to have a plan for what you will do if things don't turn out well with the cancer. And Chase has said that they have a near-term, a medium-term and a long-term succession plan. So if something goes awry, they will know what to do.

But the second thing is you've got a big conflict between your need to disclose something that is very interesting and important to investors and that competes with the individual's desire for privacy in terms of a medical issue within the family. So those two things compete.

But in our American system, disclosure, you know, trumps everything. If it's important, you need to get it out in a way that the investor can understand.

SCARLET FU, HOST, BLOOMBERG NEWS: So what did everyone learn? What did you learn from the way Apple's board, for instance, handled Steve Jobs' illness?

MILLER: Well, the most important thing, I think, is get out as much as you can about the facts of the situation, the risks, the pros and cons and all of that. Because if you don't, you will make it into a long-running story of people speculating and guessing as to what's really behind, what hasn't been said. I think in Jamie Dimon's case, they kind of said it all, and it made into a much shorter story.

JOHNSON: And Bob Benmosche effectively had a partner in you, you're the Chairman, he's the CEO. At JPMorgan it's different because Jamie Dimon is both. Does that create a conflict, an issue, et cetera?

MILLER: No, the important thing is the board has to know what they're going to do. Who's going to be in the chair tomorrow morning if the CEO gets hit by a bus this afternoon?

JOHNSON: Yeah right. And Bob Benmosche, just to circle back, is recovered and doing very well. And he was able to lead AIG through it.

MILLER: Well, he's doing very well. He still has cancer, it's treatable, not curable, which is the difference from the Jamie Dimon situation. But Bob was diagnosed with cancer back in 2010 and yet he worked 24/7 as our CEO without skipping a beat that entire time.

KEENE: To that idea Steve Miller, and I don't mean to traipse on the private affairs of Mr. Benmosche, can a CEO or any other C-class officer actually run an operation from a hospital bed or from their home receiving radiation or chemotherapy?

MILLER: Well, CEOs do take a week or two vacation here and there.

FU: It's rumored.

KEENE: It's a rumor.

JOHNSON: Yeah, Tom hasn't taken a vacation since 1990-what?

KEENE: I don't know.

FU: 1980s.

MILLER: But unless the operation hits a crisis during the time when the person is hospitalized–

KEENE: You can do it.

MILLER: For the most part, you can do it. We do have telephones and BlackBerries and other devices.

KEENE: Yeah, OK.

JOHNSON: Well, thank you, thank you for speaking so openly about it. It's a–

KEENE: And the reports are Mr. Dimon is taking his chemotherapy at Sloane.

JOHNSON: And he made very clear that this is something he can beat and he certainly intends to do so.

FU: But it is tricky for the boards because they have to be prepared for all scenarios.

0733

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0737

KEENE: Steve Miller, I've got to ask you about Peter Hancock, your colleague at AIG in the news in the "FT" this morning, of negotiating with banks to settle. This seems so odd, given multi-billion dollar settlements that we see with other banks. Describe this process. What is unique about the way AIG is approaching Morgan Stanley, JPMorgan and others?

MILLER: Well, there's nothing unique about it. The fact is that we were damaged in the crisis of '08 by having accepted a lot of securities from these banks that proved to be defected and misrepresented and so we had a lengthy discussion.

We had filed suits that amounted to more than $10 billion—

KEENE: And you got $2 billion back.

MILLER: And we ended up with $2 billion. The last big one was settling with the Bank of America. And I personally had several conversations about that along the way with Brian Moynihan and we both wanted to find something we could both live with and put it behind us.

KEENE: All right, well, we'll have to revisit this. This is important. How odd, two companies speaking. What a shock.

FU: It does happen once in a while.

0738

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0742

FU: We want to bring in our guest host Steve Miller, Chairman of AIG's board, to talk about what AIG's been doing more than $2 billion in settlements that AIG has recouped from banks over soured mortgage bonds. So does that mean that you're done with lawsuits and this effectively closes the chapter on what's been a pretty contentious period in AIG's history?

MILLER: Yeah, this is certainly the largest and we're just about complete. This was — the Bank of America settlement was a very large case. We had filed a claim for $10 billion; we ultimately concluded that this was a fair way to finish it on both sides.

FU: At least $650 million, right?

MILLER: At $650 million.

KEENE: We've got to make some news this morning. Are you going to capture another billion dollars?

MILLER: There's not another billion to be had I don't think in these cases.

KEENE: OK, let's talk about systemically important. In the auto parts business, nobody talks like that. But they do in the finance and insurance system. What does systemically important mean to Steve Miller and Peter Hancock?

MILLER: Well, it means that we have global supervision from the Federal Reserve because of our designation as being systemically important financial institution. That means that the government and the economy have a vested interest in making sure that we don't have a collapse like happened in 2008. That in turn means we have to have stress tests and a second, we're actually not fighting it, we have a second pair of eyes helping us as a board make sure that we are safe and sound.

And also if the Fed says it's OK for us to do a share repurchase, or a dividend payment, then our customers will know they must be OK. We can trust AIG if the Fed thinks they're OK.

KEENE: Right. It's a Surveillance Breaksclusive; Steve Miller likes Federal Reserve officials in his AIG office.

FU: He welcomes them.

KEENE: He welcomes them.

JOHNSON: Second set of eyeballs. There's his argument.

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0757

KEENE: We need to say, with all these distractions of international affairs this morning, thank you, Steve Miller.

MILLER: Thank you.

KEENE: For your attendance this morning with AIG and his important comments on their settlements with other banks.

0757

***END OF TRANSCRIPT***

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