Robert Benmosche, thenew chief executive of American Insurance Group (AIG), vented his frustration over government-imposed cuts to executives’ pay but denied that he planned to quit only three months into the job.
AIG’s stock slumped by 4 per cent, or $1.52 each, to $36.07 a share after investors contemplated the prospect of losing a third chief executive in slightly more than a year after a report that Mr Benmosche had threatened the insurer’s board with his resignation.
Mr Benmosche, an insurance industry veteran who investors hope can turn around the troubled insurer after its $182.3 billion government bailout, was appointed chief executive in August, the company’s third chief executive since September last year and its fifth in 18 months.
But he is thought to be struggling under the constraints imposed by the Government, which owns 80 per cent of AIG, and particularly by Kenneth Feinberg, the Government’s Special Master for Tarp Executive Compensation, who last month said that cash payments to AIG’s top 25 executives would be limited to $500,000 a year.
In a letter to employees, Mr Benmosche said: “I and the board are indeed frustrated and we are in ongoing discussions with the Treasury and the Special Master to resolve the uncertainties surrounding this [compensation] issue.”
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But he said that he remained “totally committed” to leading AIG.
“We are all working aggressively to overcome this compensation barrier that stands in the way of restoring AIG’s value and allowing us to live up to our obligations to all shareholders,” Mr Benmosche said.
AIG was in near-daily contact with Mr Feinberg in the lead-up to last month’s announcement of the pay restrictions.
The Wall Street Journal’s report that AIG’s chief executive had threatened to quit had particular resonance because Mr Benmosche, who made his fortune as the boss of Metropolitan Life, was already believed to have offered his resignation once before, when Mr Feinberg was considering the chief executive’s own compensation package.
Kenneth Lewis, chief executive of Bank of America, announced his retirement in September, apparently after tiring of the pressure of balancing the demands of his government benefactors with running the bank.
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BoA, which received a $45 billion bailout, is thought to be finding it difficult to lure in external candidates to replace Mr Lewis because of these pressures and the fact that applicants’ compensation is likely to be restricted by Mr Feinberg.
Mr Benmosche’s $10.5 million package is the biggest so far approved by the pay czar and was in stark contrast to the $1 a year that Edmund Liddy, his predecessor, accepted to come out of retirement to lead AIG from the abyss last September.
AIG was forced to seek government aid after losing billions of dollars on insurance it sold against souring sub-prime mortgages.
In April there were protests outside the homes of AIG’s workers after some shared in a $165 million retention bonus payment, while the insurer remained propped up by taxpayers.
Last Friday AIG reported its second successive quarter in the black, but it faces continued widespread restructuring, including the initial public offering of its Asian business next year.