AIG to cut senior management on heels of weak resultsReprints
American International Group Inc. plans to cut 23% of its 1,400 senior management employees in a restructuring, AIG President and CEO Peter Hancock said during a conference call Tuesday morning.
The conference call followed AIG's third-quarter earnings report in which the insurer reported a net loss of $231 million, compared with net income of $2.2 billion during the same period a year earlier.
“Compared to the prior-year quarter, the third quarter net loss was primarily due to lower income on hedge fund investments and assets marked to fair value through earnings, lower realized investment gains, and lower income from settlements of nonoperating litigation,” said AIG in a statement accompanying its third-quarter results.
During the conference call, Mr. Hancock also rejected a call from investor Carl Icahn to split off the company's life and mortgage insurance units from its property casualty business.
Mr. Hancock said that AIG management and directors had previously examined the issue, and “concluded that it did not make financial sense.” He added, though, that AIG will meet with Mr. Icahn to discuss the issue.
In a subsequent interview with CNBC, Mr. Hancock said he will meet with Mr. Icahn on Thursday.
For the third quarter, net written commercial property/casualty insurance premiums fell 5.6% from those of the same period in 2014 to $5.20 billion. The combined ratio deteriorated to 102.7% from 102.1%.
For the first nine months of the year, net income fell 41.3% to $4.04 billion. Net written commercial property/casualty insurance premiums fell 3.0%, to $15.83 billion while the combined ratio deteriorated to 99.6% from 99.2%.
In its statement, AIG said that its restructuring initiatives will focus on organizational simplification, operational efficiency and business rationalization, which are expected to generate pretax annualized savings of approximately $400 million to $500 million when fully implemented.
“These initiatives are expected to result in pretax restructuring and other costs of approximately $0.5 billion including approximately $0.3 billion of employee severance and one-time termination benefits, concentrated initially among management's senior levels. Further staff reductions are anticipated in 2016,” said the statement.