Robert Benmosche, the new chief executive of American Insurance Group (AIG), vented his frustration yesterday over government-imposed cuts to his executives’ pay but denied that he planned to quit only three months into the job.
AIG’s stock fell 90 cents, or 2.4 per cent, to $36.07 yesterday as investors contemplated the prospect of losing a third chief executive in little 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 whom investors hope can turn around the troubled insurer after its $182 billion government bailout, was appointed chief executive in August. He is the company’s third chief executive since September last year and its fifth in 18 months.
However, 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 said last month that cash payments to AIG’s top 25 executives would be limited to $500,000 a year. In a letter to employees yesterday, Mr Benmosche wrote: “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.”
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.” AIG was in near-daily contact with Mr Feinberg in the lead-up to October’s announcement of the pay restrictions.
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The Wall Street Journal’s report that AIG’s chief executive had threatened to resign had particular resonance because Mr Benmosche, who made his fortune as the boss of Metropolitan Life, was 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 (BoA), announced his retirement in September after reportedly tiring of the pressure of balancing the demands of his government benefactors with running the bank. BoA, which received a $45 billion bailout, is thought to be finding it difficult to lure external candidates to replace Mr Lewis amid these pressures and the fact that their pay is likely to be restricted by Mr Feinberg.
Mr Benmosche’s $10.5 million package is the biggest so far approved by the “pay csar” and was in stark contrast to the $1 per 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, while the insurer was shored up by taxpayers. Lat Friday, AIG reported its second straight quarter in the black but it faces continued widespread restructuring, including the initial public offering of its Asian business next year.
Its results were boosted by the growing value of investments the company holds that soured last year and helped drive it to the brink of collapse. Mr Benmosche has warned that earnings will remain uncertain as the company executes its restructuring plan. AIG is hiving off two life insurance businesses, American International Assurance and American Life Insurance, to help to repay the Government.