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?AIG has decided to terminate and pay out the deferred pay plans to remove the incentive for employees to leave in order to obtain their deferred pay,? said Andrew Kaslow, senior vice president of human resources, in a statement.
?Many AIG employees have seen their life savings wiped out in the financial crisis,? Kaslow said. ?Employees are now concerned about obtaining the pay they have earned but deferred so they can pay for retirement, college tuition or other expenses."
The termination involves 14 of 17 AIG voluntary deferred compensation plans, said spokesman Joe Norton.
Norton said the money has been contributed to the plans over several years and did not involve any money loaned to AIG through federal credit agencies or the federal Troubled Asset Relief Program. Earlier this week, AIG agreed to a revamped, $150-billion federal bailout plan to keep the company solvent (BestWeek, Nov. 10, 2008).
?There is no federal funding involved,? he said. ?This was money that was earned and just deferred. It's fair to say they are concerned about having access to funds they have already earned.?
Norton acknowledged that employees could wait to receive the money and then leave the company, but said AIG officials believe this step is necessary as part of its overall employee retention effort.
The employees could gain the pay today by leaving -- a concern as the company is working to maintain the value of its businesses, "whether those businesses are to be sold to repay our Federal Reserve loan or to be continued as part of a restructured AIG," Norton said.
AIG would not identify employees who are included by name or title, said Norton, nor would he give a range of the highest and lowest payments.
The deferred compensation will not be going to employees of AIG?s Financial Products group, the London-based operation that wrote more than $500 billion notional in credit default swaps through June 2008 that are at the heart of AIG?s financial crisis. Last month, AIG pledged to New York State Attorney General Andrew Cuomo that it will freeze $600 million in deferred compensation and bonus pools for the financial products division (BestWire, Oct. 22, 2008).
A.M. Best Co. on Nov. 10 affirmed the financial strength ratings and issuer credit ratings of the insurance subsidiaries of AIG, removed them from under review and assigned them a negative outlook. Most currently have a Best's Financial Strength Rating of A (Excellent). In addition, A.M. Best has affirmed the issuer credit rating of bbb of AIG.
Shares of AIG closed at $2.08 a share on Nov. 14, up 0.97% from the previous close.
(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest.com)
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