Hard-nosed CEO takes on AIG

As CEO of insurance giant Allstate, Edward Liddy presided with a Midwesterner’s even temper, able to make tough, often unpopular, corporate decisions and stick to them. In particular, Mr. Liddy caught substantial flak for his move to convert Allstate’s sales force to a network of independent agents, and stirred consumer wrath when the insurer stopped writing homeowners policies in coastal towns vulnerable to hurricanes.

That resolve should serve Mr. Liddy well in his newest position atop the hemorrhaging insurance giant American International Group. Mr. Liddy, who retired as chairman of Allstate five months ago, was tapped to replace CEO Robert Willumstad after rating downgrades sparked a liquidity squeeze and near-collapse at the insurer, setting up the Federal Reserve’s $85 billion bailout attempt last week.

Mr. Liddy’s fat Rolodex should also help as he takes on the job of selling off assets of the country’s largest insurer. He’s a member of an elite group of directors that overlap on a number of blue-chip company boards. (In late 2006, Mr. Liddy was number seven on FW’s Mightiest Directors list for his considerable clout in governance circles.) It was on the board of Goldman Sachs that Mr. Liddy got to know then-CEO Henry Paulson, and clearly made a good impression; as Treasury Secretary, Mr. Paulson selected him for his new post. Mr. Liddy also sits on the boards of 3M and Boeing.

AIG could be Mr. Liddy’s biggest challenge yet. While Allstate traditionally was narrowly focused on consumer, auto, homeowners and life insurance, AIG is a conglomerate with far-flung operations, including specialized and exotic products like insurance for corporate directors and identify theft, as well as the derivatives designed to protect investors against losses in subprime mortgages.

“It’s going to be a big job—more complex—than Allstate,” said Peter Newsome, an analyst at Chicago investment firm Sandler O’Neill.

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