Could the Retirement Age Creep
Up to 80? AIG's CEO Thinks So.
By Boris Cerni and Zachary Tracer,
The Washington Post
June 4, 2012
June 4 (Bloomberg)
-- American International Group Inc. Chief
Executive Officer Robert Benmosche said Europe’s
debt crisis shows governments worldwide must
accept that people will have to work more years as
life expectancies increase.
“Retirement ages will have to move to 70, 80 years
old,” Benmosche, who turned 68 last week, said
during a weekend interview at his seaside villa in
Dubrovnik, Croatia. “That would make pensions,
medical services more affordable. They will keep
people working longer and will take that burden
off of the youth.”
The crisis, now in its third year, threatens to
destroy Europe’s 17-nation currency union as
Greece contemplates exiting the euro and Spain
sees its bond yields rise and banking industry
falter. German Chancellor Angela Merkel hardened
her opposition to joint debt sharing in the euro
region as U.S. President Barack Obama singled out
Europe’s leaders for not doing enough to arrest
the crisis.
Greece abandoning the euro could be a disaster for
the country and Europe must work to keep that from
happening, said Benmosche, whose company was the
world’s biggest insurer before it took a U.S.
bailout.
“People in Greece have to see there is no easy way
out of this” and the government must get them to
work longer, he said in the June 2 interview on
the Adriatic coast. “If not, and if they go to
their own currency, I think they will see huge
inflation and it will be devastating for people on
fixed incomes.”
Life Expectancy
Greece, where the average life expectancy is 81.3
years, has an effective retirement age of 59.6,
among the lowest in Europe, according to data
compiled by Bloomberg. French President Francois
Hollande, the Socialist who was sworn in last
month, has pledged to cut the retirement age to 60
from 62 while increasing corporate and bank taxes
and introducing a 75 percent levy on earnings of
more than 1 million euros ($1.2 million).
Peter Hancock, CEO of AIG’s Chartis
property-casualty unit, said last week the insurer
has assigned staff from Argentina to advise their
counterparts in Athens as the company prepares for
a possible Greek exit from the euro, with the
common currency at its lowest against the U.S.
dollar since June 2010. Argentina defaulted on a
record $95 billion of debt in 2001 and later
abandoned a decade-long 1-to-1 peso peg to the
greenback.
“We have gone through the crisis in Argentina and
other countries over time, so we have experience,”
Benmosche said.
The short-term nature of some of the company’s
insurance contracts would minimize disruption if
Greece stopped using the euro, he said.
Local Currency
“Our premiums would convert to the local currency,
but if they do, so will our obligations,” he said.
“We will deal with the rules at the time.”
Benmosche has sold non-U.S. life insurers, a
consumer lender and other businesses to pay back
its taxpayer rescue, which swelled to $182.3
billion as the U.S. extended more credit and
lowered the interest charged. The Treasury
Department has cut its stake to 61 percent from 92
percent through three share sales totaling about
$17.6 billion. In the most recent two, AIG bought
back a total of $5 billion in stock.
AIG still seeks to divest its plane-leasing unit
and sell its remaining stake in Hong Kong-based
insurer AIA Group Ltd.
‘The Overhang’
“The overhang from the government’s ownership
interest in AIG is in the process of going away,”
Paul Newsome, an analyst at Sandler O’Neill &
Partners LP, wrote in a May 30 research note. “AIG
should have sufficient enough capital to
facilitate the Treasury Department’s exit.”
Treasury raised $5.8 billion in the first offering
in 2011, selling for $29 a share. At the same
time, AIG sold 100 million shares for $2.9 billion
to demonstrate access to the capital markets and
satisfy a condition of its bailout. The insurer
bought half of the $6 billion in stock the
department divested at $29 apiece in March and $2
billion of a $5.75 billion offering that went for
$30.50 a share in May. The government needs to
average $28.72 to break even on its investment.
AIG slid 6.8 percent on June 1 to close the week
at $27.21 after U.S. employers created the fewest
jobs in a year and the nation’s jobless rate rose
to 8.2 percent. Reports also showed manufacturing
grew less than estimated in the U.S. and China,
and contracted for a 10th month in the euro
region.
Benmosche said people and businesses in the U.S.
lack confidence and are hesitant to invest as
financial regulation and tax policies remain
unsettled.
“I am optimistic that we’ll continue to grow, and
if we get past this period of uncertainty and gain
confidence again in the U.S. economic system, that
will help lead the world out of the situation we
are in today.”
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