Bloomberg News

Benmosche Gets 24% Pay Boost in 2013 After AIG Bailout Repaid

April 04, 2013

American International Group Inc. (AIG:US) increased Chief Executive Officer Robert Benmosche’s pay package by 24 percent after he repaid a U.S. bailout.

Benmosche, 68, is eligible in 2013 for $13 million, including an annual bonus of $4 million and multiyear incentive pay of $7 million, on top of a cash salary of $2 million, according to a regulatory filing yesterday. He received $10.5 million in 2012, with $3 million in cash and $7.5 million in stock, and neither amount was tied to AIG’s performance.

The insurer is revamping pay plans for executives to link compensation to performance after exiting restrictions imposed by the Treasury’s Troubled Asset Relief Program as part of a rescue that swelled to $182.3 billion. Pay for AIG’s top five officers will be based mostly on results after the New York- based company said last month that it adopted bonus plans.

“AIG’s new executive compensation structure strongly emphasizes pay for performance,” Jon Diat, an AIG spokesman, said in an e-mailed statement. “This new structure replaces the TARP mandated compensation restrictions.”

Peter Hancock, who oversees AIG’s property-casualty unit, is eligible for $9 million in 2013 compensation, compared with $8 million last year. His fixed pay was cut to $1.35 million in cash, from $7 million in cash and stock last year.

Jay Wintrob, the head of the life insurance and annuities business, had his total compensation boosted to $8 million from $7 million in 2012. The 2013 figure includes a target of $6.8 million in performance-based bonuses.

AIG Targets

The executive pay plan is tied to results beginning in 2013, Diat said. The executives are eligible for long- and short-term bonuses, and the latter are based on AIG’s performance relative to peers in terms of total shareholder return and growth in tangible net book value (AIG:US) over a three-year period, Diat said.

AIG also said last month it established a policy to claw back incentive pay from executives who harm the company’s finances or reputation. The company was faulted in 2009 for paying retention bonuses to employees including members of the Financial Products unit that oversaw derivative bets that almost shuttered the firm. Staff at the derivatives unit got more than $400 million in incentive payments after the rescue.

Wintrob and Hancock got 2012 bonuses that matched their targets, AIG said in the filing. The bonus pool for some employees declined because certain units didn’t meet 2012 benchmarks, Benmosche said in a letter to staff in February.

‘Tough Luck’

“Our profit goals were not quite achieved,” Benmosche said in an interview with Bloomberg Television that month. “Now, some people say, well gee, that plan might have been a little too aggressive. Well, tough luck. That was our plan. We live by the plan.”

Policy sales at the property-casualty unit fell to $34.4 billion in 2012 from $34.8 billion a year earlier. At the life and retirement unit, premiums, deposits and other considerations dropped 14 percent last year compared with 2011. Still, AIG’s operating profit (AIG:US) tripled to $6.6 billion in 2012 as investments gained.

David Herzog, AIG’s chief financial officer, and William Dooley, executive vice president for investments had their total compensation boosted to $7 million this year, mostly tied to performance. Herzog got $6.3 million last year, and Dooley was awarded $6 million.

New Directors

AIG also made nominations for its first new board members since ending the bailout, and said Morris Offit will retire after more than seven years on the panel. William Jurgensen, 61, former CEO of Nationwide Mutual Insurance Co., and Theresa Stone, 68, a former insurance executive at Jefferson-Pilot and Chubb Life who was executive vice president of the Massachusetts Institute of Technology, were nominated to join the board. The annual shareholders’ meeting is scheduled for May 15.

AIG advanced (AIG:US) 52 percent last year as the company bought back stock from the U.S. and sold units to help wind down the bailout. The shares have lost more than 95 percent of their value since the end of 2006. The U.S. took over the insurer in 2008 to save it from collapse when bets on housing soured.

The Treasury Department imposed pay restrictions on top executives at AIG and other firms that received U.S. rescues amid the 2008 financial crisis. AIG finished repaying its bailout in December. That opened the door for AIG to adjust its compensation program, Chairman Steve Miller said in January.

“You need to put a carrot out in front of people to get them to perform at their very best,” Miller said on Bloomberg Television. “They’ve performed miracles without it, but we think they can do even better if we can put in the right tailored comp program.”

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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