American International Group Inc. recently made several high-level appointments and agreed to sell some assets, but recruiting talent and repaying government debt will remain challenges, according to experts.
Among the executive-level appointments two weeks ago,
AIG filled the long-vacant post of human-resources head and brought in a Wall Street veteran as its chief administrative officer.
The new hires are a positive sign that the insurer is making progress in rebuilding its management ranks, but recruiting and retaining talent will remain a challenge for
AIG as long as it remains government-owned and subject to executive-compensation restrictions, observers said.
Separately, the company reached agreements to sell its Canadian and Israeli mortgage insurance businesses as it disposes of non-core assets to repay bailout funds. As of last month,
AIG owed about $97 billion to the government.
In an internal memo two weeks ago,
AIG president and chief executive Robert Benmosche said that Jeff Hurd, chief administrative officer, was named senior vice president and head of human resources. Mr. Hurd succeeded Andrew Kaslow, the human-resources chief who departed last fall.
Also according to the memo, Michael Cowan, a longtime executive at Merrill Lynch & Co. Inc., was named chief administrative officer. Mr. Cowan, who was senior vice president of global corporate services at Merrill Lynch, will oversee
AIG's operations, systems and corporate administration, as well as the “separation office,” which focuses on units to be sold, an
AIG spokeswoman said.
Mr. Benmosche, who has been working to replace executives who departed after the company's bailout, said the organizational changes will “help increase our momentum and strengthen our organization.” He also told employees to remain focused on “core priorities,” including “repaying taxpayers, strengthening our business and serving clients.”
Observers said that filling the key positions should add stability to AIG, but they also warned that the situation remains fluid.
The appointments followed the recent resignation of Anastasia Kelly, AIG's general counsel and vice chairman for legal, HR and corporate affairs. She left due to federal salary caps imposed on executives of companies that took government bailout funds.
In addition, Suzanne Folsom, chief compliance and regulatory officer, left the company.
AIG is looking for successors for both posts.
Nick Ashooh, AIG's senior vice president of communications since September 2006, also resigned. Christina Pretto, who prior to the promotion was vice president of corporate media relations, succeeded Mr. Ashooh, according to the memo.
The high-profile departures underscore the continuing pressure that AIG faces because of government restrictions imposed as part of its ownership stake in the insurer, observers said.
“When you have a revolving door at the top, it makes it very difficult to gain traction and move the company forward,” said John Challenger, chief executive of executive recruiting firm Challenger Gray & Christmas Inc.
AIG likely will struggle to find a candidate of Ms. Kelly's caliber for the top legal job because the insurer is “unable to pay market prices,” according to Richard V. Smith, senior vice president at Sibson Consulting.
Ms. Kelly, who joined AIG in 2006, helped the insurer recover from regulatory investigations that led to the 2005 departure of former AIG leader Maurice R. “Hank” Greenberg, and oversaw the 2009 legal settlements between him and AIG.
With her departure, “they lost a very talented individual,” said John L. Ward, chief executive of Cincinnatus Partners LLC. “This is a prime example of when the pay curbs can be counterproductive.”
The talent problem may last several more years, observers said.
Mr. Benmosche, who has slowed the pace of asset sales since taking the reins at AIG in August, told the Financial Times last month that it may take two years for AIG to repay the government.
AIG's reportedly recent decision to hold off on an initial public offering of property/casualty unit Chartis Inc. also may result in additional departures, observers said.
“There would be more incentive for [a Chartis employee] to stay, given the potential financial benefit of participating in an
IPO,” said Mark Lane, a research analyst with
William Blair & Co. LLC.
Meanwhile, AIG recently entered into an agreement, terms of which weren't disclosed, to sell its Canadian mortgage insurance business to a private investor group headed by the Ontario Teachers' Pension Plan, the group said in a statement. AIG United Guaranty Mortgage Insurance Co. Canada has about $264 million in assets.
The move followed Harel Insurance Investments and Financial Services Ltd.'s announcement last month that it agreed to acquire AIG's Israel-based mortgage insurance business, EMI Ltd., for $35.5 million, according to Dow Jones. EMI unit Ezer Mortgage Insurance Co. Ltd. is held by AIG's United Guaranty Corp. unit.
AIG representatives declined to comment on the sales.
Also two weeks ago, a federal appeals court upheld a lower-court ruling that could cost U.S. Life Insurance Co., an AIG unit, more than $517 million, California Insurance Commissioner Steve Poizner said.
In U.S. Life Insurance Co. v. Superior National Insurance Co., the 9th U.S. Circuit Court of Appeals upheld a 2007 arbitration award that called for U.S. Life to pay on its reinsurance coverage for five California workers' compensation insurance companies that were liquidated in 2000.
Colleen McCarthy is an associate editor at sister publication Business Insurance.
