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AIG's new CEO shakes up restructuring plan Print E-mail
Wednesday, 19 August 2009

By Matthew Quinn

It only took new AIG chief executive Robert Benmosche about a week to start re-jiggering the insurer's restructuring plan, nixing the auction of the insurer's investment advisory unit.

"Benmosche is beginning his strategic review and this is one of his early decisions," AIG spokesman David Monfried told Reuters on Tuesday.

The plan all along for AIG to repay the loans it racked up as part of its $182.5 billion bailout by the U.S. government has been to sell off assets. Since September, the insurer has announced roughly $9.3 billion in divestitures. The company, which reported its first quarterly profit since the third quarter 2007 this month, still owes the government $86.4 billion.

Even so, AIG management, including Benmosche's predecessor Edward Liddy, hasn't seemed in any rush to fully execute on the plan to repay taxpayers. Indeed, proceeds from the two biggest divestitures so far announced by AIG, which brought in $2.4 billion, weren't used to pay down the government debt. Rather, they went to shore up the capital base of a property-casualty unit.

Granted, the investment advisory business, which is part of its retirement services unit, wasn't likely to fetch big bucks. But any sales would at least seem like a good-faith effort at this point, considering still-uncooperative credit markets are stalling bigger sales.

Oddly enough, the biggest sale of AIG assets in the works is, well, a sale to the Federal Reserve. AIG has formed special purpose companies to house the equity of two of its biggest life insurers. The Fed will take a preferred stake in both, under a pact that could reduce the insurer's federal IOU by $25 billion. The hope is then to take the companies public.

The decision to reboot the restructuring may reflect something more in the handoff of power from Liddy to Benmosche. Liddy, who earned $1 in pay and a lot of heartburn for his service, was more of a guardian of the AIG wreckage for the U.S. government.

Benmosche, on the other hand, is charged with reshaping AIG strategically and has a pay package commensurate with that role, getting an annual salary of $7 million plus long-term incentive awards of as much as $3.5 million a year.

The package, which has received "approval in principle" from Kenneth Feinberg, the Treasury's compensation czar for bailed-out institutions, includes $4 million in fully vested AIG stock.

That equity stake will "align his interests with those of AIG," according to a Securities and Exchange Commission filing.

Theoretically, that should jibe well with the interests of the U.S. government, which just happens to be the biggest AIG shareholder, as well.

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