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In a filing with the U.S. Securities and Exchange Commission, AIG (NYSE: AIG | Quote | Chart | News | PowerRating) said it still would pay out $273.5 million to current employees in connection with its termination of its AIG Supplemental Incentive Savings Plan, AIG Executive Deferred Compensation Plan, SunAmerica Executive Savings Plan and 11 other legacy plans of AIG assumed in connection with acquisitions.
That was down from the $367 million in deferred compensation it initially said in November it planned to pay out during the first quarter, a plan that drew scrutiny from Reps. Joseph Crowley, D-N.Y., and Paul E. Kanjorski, D-Pa., the chairman of the House Financial Services Subcommittee on Capital Markets and Insurance. According to Kanjorski, an internal probe he and Crowley requested the company perform demonstrated that $90.3 million of the payouts would have gone to former employees and agents, running counter to the stated goal of using the awards to retain key personnel.
"While I commend AIG for cooperating with our inquiry, I still have many questions about the developments that led to a federal rescue of AIG, and the Federal Reserve's and the Treasury's ongoing oversight, or lack thereof, of that intervention," Kanjorski said in a statement. "This case provides a prime example of how a minimal review of AIG can result in a better use of taxpayer money."
According to the company's 8-k filing, the company also will cancel deferred compensation that would have gone to executive officers invested in AIG's Senior Partners Plan. Of the $6 million of account balances in the plan, roughly $3 million was scheduled to go to executive officers, who are precluded from the awards by compensation caps instituted on companies that draw funds from the Treasury Department's Troubled Asset Relief Program.
AIG's $150 billion federal rescue package includes $40 billion from the TARP's Systemically Significant Failing Institutions Program, which purchased perpetual preferred shares in the company and warrants equal to 2% of issued and outstanding shares. The Federal Reserve Bank of New York, which provided the remaining $110 billion loan and liquidity package, holds warrants for nearly 80% of the company's equity.
AIG noted that it closed the deferred payment plans Dec. 31 to new contributions, but participants accounts will continue to accrue earnings until the planned April 1 distribution.
Shares of AIG were selling at $1.64 the afternoon of Jan. 8, unchanged from the previous close.
Most insurance subsidiaries of AIG currently have a Best's Financial Strength Rating of A (Excellent) with a negative outlook.
(By R.J. Lehmann, Washington bureau manager: raymond.lehmann@ambest.com)
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