XL rebounded "from the depths of despair," says Bloomberg News, which quotes analysts who give credit to new CEO Michael McGavick, who joined the company in May 2008. XL's stock climbed $14.63 to $18.33 since last January 1, making its rise the biggest percentage gain among S&P companies since 2003.
So who is this magic man? Here's a quick synopsis from his resume on the website. McGavick had been president of Seattle-based Safeco Corp., one of the nation's biggest car insurers, from 2001 to 2005. Before that he had broad experience in insurance as an executive at Chicago-based CNA. But what about the intervening years? A maverick, as well as a renaissance man, McGavick ran for the U.S. Senate, but lost.
If the name "Safeco" rings a bell in connection with AIG, here's the six degrees of separation. When McGavick left Safeco, the insurer did an exhaustive search to find a new CEO and settled on Paula Rosput Reynolds, whose background was in utilities. About the only thing she accomplished at Safeco was to sell it to Liberty Mutual. Then being out of a job herself, she landed at AIG as the head of its divestiture effort under then CEO Ed Liddy. The big fire sale that she and Liddy envisioned failed dismally and Reynolds left AIG the same time that CEO Robert Benmosche came aboard.
Benmosche's reviews are mixed. He has spent much of the last five months giving interviews, tasting wine at his Croatian villa, threatening to resign and tangling with government officials over AIG executives' declining salaries. Not his, mind you. Benmosche makes $10.5 million.
But McGavick's reviews are boffo. The 51-year-old dealt with issues not all that dissimilar, albeit on a smaller scale, to AIG's. He "took over a company that was essentially on the brink of going out of business," says an analyst quoted by Bloomberg.
One of its biggest problems was a bond guaranty unit called Security Capital Assurance, which had insured some of the same bad subprime investments and collateralized debt obligations (CDOs) that torpedoed AIG's financial products unit. McGavick faced the problem head on, bailed out the unit, sold stock to fund the rescue, cut the staff and dividend, and shifted the insurer's portfolio to lower risk investments. In other words, he moved fast and made the tough calls that a CEO has to make in a bad situation.
It now appears that XL will survive and thrive, thanks to new management. That is what the market is saying. Unfortunately, the same can't be said for AIG.