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AIG pays big for ‘phenomenal’ choice of CEO

Posted On: May. 15, 2017 1:21 PM CST

AIG pays big for ‘phenomenal’ choice of CEO

American International Group Inc. will pay tens of millions to bring Brian Duperreault in to lead the insurer, according to regulatory filings, but it will be getting a CEO who will restore morale and fix other problems at AIG, an insurance industry analyst wrote Monday.

Meyer Shields, managing director at Keefe, Bruyette & Woods Inc., wrote in a note to investors that Mr. Duperreault is a “phenomenal choice” to head AIG.

Mr. Duperreault, age 70, the former chief executive officers of Hamilton Insurance Group Ltd., was named CEO of AIG Monday after several weeks of rumors that he was being targeted for the job.

“We think Mr. Duperreault’s arrival strongly argues that AIG’s current challenges are fixable,” Mr. Shields wrote, “and we believe that his presence will materially alleviate employee, broker, and insureds’ concerns.”

AIG will pay Hamilton $20 million to release Mr. Duperreault, according to an AIG filing with Securities and Exchange Commision, with another $20 million payable once he completes his second year.

Mr. Duperreault’s initial compensation will consist of an annual base salary of $1.6 million, a short-term annual incentive target of $3.2 million and an annual long-term incentive award of $11.2 million, according to the filing.

Mr. Duperreault’s long-term incentive award for 2017 is 70% in the form of performance share units earned based on achievement of performance criteria for the three-year performance period covering January 2017 through December 2019, and 30% in the form of restricted stock units earned based on continued employment through such three-year period.

In addition, Mr. Duperreault will receive a one-time cash award of $12 million as compensation for unvested Hamilton equity awards to be forfeited by him in connection with his appointment as president and CEO of AIG, and a one-time, sign-on award of stock options to purchase $1.5 million shares of AIG common stock.

The company is also buying Hamilton subsidiary Hamilton U.S. Holdings, Inc. for about $110 million and offering Hamilton the option of assuming $150 million of AIG’s reinsurance premiums.

According to Reuters, Mr. Duperreault told investors Monday that he did not intend to break up AIG. Previously, activist investor Carl Icahn had pressed for a break up of AIG.

On Twitter on Monday, Mr. Icahn said he was pleased that AIG’s “board is finally making some of the much-needed changes we’ve been advocating the last 18 months.”