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Rivals snatch AIG staff as uncertainty lingers

Insurer says personnel defections manageable


NEW YORK--Numerous senior underwriting executives have bolted from American International Group Inc. in recent weeks in an exodus that some departed executives and AIG's competitors expect to continue as many remaining AIG personnel circulate their resumes.

But senior AIG officials and several brokers said the company's 12,500 U.S. employees provide AIG a deep pool of talent from which it can draw replacements.

For example, Ralph Mucerino, the New York-based president of AIG Global Marine & Energy, said he filled two key open positions in his division with "two five-minute phone calls."

In addition, AIG is hammering out a new executive compensation plan in an effort to retain executives whose compensation plunged along with AIG's stock price, said John Doyle, the New York-based president and chief executive officer of AIG Commercial Insurance. AIG's domestic property/casualty insurance companies report to Mr. Doyle's unit.

AIG's financial position dramatically deteriorated in September when subprime-related problems forced it to turn to the government for $122.8 billion in bailout loans (BI, Oct. 13, Sept. 29, Sept. 22).

To repay the debt, the New York-based insurance holding company plans to sell some company assets but retain its core property/casualty insurance units (BI, Oct. 6).

While many risk managers said they would not move their business, 30 to 40 AIG underwriting and claims officials have defected to competitors in recent weeks, Mr. Doyle acknowledged. AIG, however, considered only a half dozen of them "key" executives, a small percentage of the company's approximately 200 key personnel, he said.

It's still a talent churn that observers agree is much greater than normal.

Indeed, in several cases, teams of AIG executives have moved to other insurers.

For example, W.R. Berkley Corp. has picked up two teams.

The Greenwich, Conn.-based insurer created a worldwide property unit for energy risks and named former AIG executive Frank Costa as its president. Mr. Costa had been president of the AIG Oil Rig Division. AIG's Mr. Mucerino confirmed that Mr. Costa took three subordinates, including a senior manager, with him. Mr. Mucerino also said that another team of five executives, including three senior managers, left without disclosing where they were headed.

Berkley also established a professional liability underwriting facility and named John Benedetto president. Mr. Benedetto was a key AIG executive in his role as president of AIG Executive Liability's national accounts division. Other executives hired for the facility include Executive Vp Steven P. Walsh, who had been the president of corporate accounts at Mr. Benedetto's AIG unit, and Senior Vp Paul Brophy, who held the same title with the AIG unit.

Another group of AIG D&O executives recently joined ACE USA's Professional Risk unit in New York. Former AIG key executive Scott A. Meyer, who was president of AIG's Financial Institution Group and M&A Group, was named an executive vp at ACE; Steven F. Goldman, a former executive vp in AIG's Financial Institution Group, was named a senior vp; and former AIG executive Michael Mollica has been named an assistant vp at the ACE unit.

AIG also lost an aviation team to the Atlanta office of Allianz Aviation Managers, a division of Allianz Global Corporate Specialty. William E. Lovett, another former key AIG executive in his role as president and chief executive officer of AIG Aviation (North America), now is the managing director at the Allianz unit. In addition, former AIG Aviation claims specialists Keith Wright and Peter Guy were named vps at Allianz Aviation.

New York-based Allianz Aviation CEO Harold Clark said, "We've not gone out to make contact or have hired recruiters" in an effort to hire away AIG personnel. But Mr. Clark noted that he continues to receive resumes from AIG personnel and would consider them.

Berkley and ACE would not comment on whether they targeted AIG executives.

Citing recent discussions with current AIG personnel, a former AIG executive who worked in another area of the company said Mr. Clark's approach is consistent with other AIG competitors.

Many people at AIG are "looking for a new job," said the former executive, who didn't want to be identified.

That former executive and several others said the plunge in AIG stock value was an important factor in their decisions to leave the company.

Some also said that they left in part because they do not see how AIG can service its government debt without selling one or more of its core insurance units.

And even if AIG decides to sell those units, buyers may want to avoid merger problems by buying only renewal rights to books of business and cherry-picking just a few of the executives responsible for that business, observers say.

In addition, even if a buyer was interested in acquiring an AIG company, a deal would be tough to negotiate because portions of AIG units' capital are tied to assets that AIG has said it must sell to pay off the government loans, sources said.

D&O and aviation brokers said risk managers are concerned about the loss of their underwriting contacts at AIG and that some have refused to renew with AIG as a result. A few also have canceled their coverage midterm, brokers said.

But largely, there is no wholesale departure of D&O and commercial aviation policyholders from AIG, brokers said. However, uncertainty over AIG's future has prompted many risk managers for Fortune 500 companies to move corporate fleet coverage to other insurers, aviation brokers said.

AIG's Mr. Doyle said competitors are targeting AIG personnel. "I know for sure that competitors are approaching our people, but that's not a new phenomenon," he said, noting that senior management at many competitors has long included former AIG executives.

Mr. Doyle stressed, though, that AIG is not losing significant business, because departing executives cannot take clients with them. In addition, many executives that AIG is tapping have more experience than those that have left, he said.

"We're not happy to lose any talented people, but it's not problematic." Mr. Doyle said.