Insurer American International Group Inc. (AIG) said it has implemented changes to the salaries of its three top executives to comply with pay restrictions for companies that received bailout money from the federal government, according to a regulatory filing Wednesday.
AIG, once the world's largest insurer, almost collapsed in mid-September 2008 after rating downgrades forced the company to post collateral on credit-default swaps which banks bought from the insurer to protect against losses on fixed-income holdings, has received more than $180 billion in bailout money from the federal government. The government now owns 79.9% of the company.
The bailout package received by AIG includes restrictions on compensation for the company's highest-paid employees. AIG must get approval of compensation plans for its top executives from the Obama administration's pay master, Kenneth Feinberg.
In a filing with the U.S. Securities and Exchange Commission, AIG said it will now pay its Chief Financial Officer David Herzog an annual salary of $350,000, pro-rated for the period from November 1 to December 31. In addition, Herzog will receive annual stock salary of $3.10 million, which vest at grant. He is eligible to receive 2009 annual long-term incentive awards payable in restricted stock of up to $833,333 if he achieves certain performance goals.
Kristian Moor, who was named CEO of AIG's spun-off property casualty and general insurance business Chartis in July, will be paid $450,000 in annual salary, pro-rated for the period from November 1 to December 31. Moor will also get $4.69 million in stock and potentially another $2 million in performance-based restricted stock.
Win Neuger, chief executive of the company's asset-management business AIG Investments, will receive $425,000 in annual salary, pro-rated for the period from November 1 to December 31, 2009. Neuger is not eligible for an annual stock salary or long-term incentive awards as he will leave AIG after the previously-announced sale of the company's asset-management business.
None of the three executives were given stock grants in 2008, according to a June filing with the Securities and Exchange Commission.
AIG also said it has suspended accruals for the three executives, to the extent they participate, under AIG's supplemental retirement plans and other nonqualified deferred compensation plans.
In mid-October, AIG said it has paid the past due installments of the executive retention bonuses totaling $12.1 million, which the company had voluntarily delayed, pending the release of the review of its proposals on executive pay. The company said that a total of $4 million in retention bonus was granted to four employees, including Herzog and Moor. AIG paid $1 million to Herzog and $1.6 million to Moor.
AIG also said on Wednesday that it reached a settlement with its former Chairman Maurice Greenberg related to various long-standing legal issues. AIG entered into a Memorandum of Understanding with Greenberg, former chief financial officer Howard Smith, as well as two companies controlled by Greenberg, C.V. Starr & Co. Inc. and Starr International Co., Inc. that would put an end all disputes amongst them.
On Tuesday, AIG said it is implementing the compensation agreement of President and Chief Executive Officer Robert Benmosche.
In a regulatory filing with the U.S. Securities and Exchange Commission in August, AIG had said it reached an agreement with Benmosche related to his annual compensation package.
Under the agreement, Benmosche would receive an annual salary of $7 million, consisting of $3 million in cash and $4 million in fully-vested common stock of AIG. The after-tax shares granted to Benmosche will not be transferable for a period of five years except on approval from the company's Compensation and Management Resources Committee in the case of death or disability. The Special Master for TARP Executive Compensation has expressed approval in principle regarding the structure and amount of Benmosche's compensation arrangements.
AIG closed Wednesday's regular trading session at $34.68, down $0.32 or 0.91% on a volume of 4.24 million shares.
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