AIG American International Group Inc

By Leslie Scism 

American International Group Inc. paid $67.3 million to its chief executive officers in 2017, with part of the payment going to a man who resigned under pressure early in the year and another portion to attract his successor.

The steep executive pay is the cost of AIG changing its strategy for boosting lackluster profit margins. In March 2017, former Chief Executive Peter Hancock stepped down under pressure from activist investors as his turnaround plan suffered setbacks. He was succeeded in mid-May by Brian Duperreault, a longtime industry executive who had begun his career at AIG in 1973.

Mr. Duperreault, who ran three other firms before being recruited by AIG last year, racked up $43.1 million in compensation for 2017, according to AIG's newly filed proxy. That includes two previously disclosed awards totaling $28.2 million to get him to leave Hamilton Insurance Group Ltd., a Bermuda property-casualty insurer and reinsurer that he founded in 2013 and ran.

Mr. Hancock had total compensation of $24.2 million. Of that, $5 million is a previously disclosed payment for agreeing to stay until a successor was found, which turned out to be about two months. Mr. Hancock also received $9.5 million as a lump sum under terms of AIG's executive-separation agreement, which was in place as of 2012, also previously disclosed.

Messrs. Duperreault and Hancock earned salary totaling $1.6 million between them: $1 million for Mr. Duperreault's 7 1/2 months and just under $600,000 for Mr. Hancock's 4 1/2 months. Both executives also had long-term-incentive stock awards valued at $11.2 million for Mr. Duperreault and $8.1 million for Mr. Hancock.

AIG's compensation for its top executives exceeds what many Wall Street banks paid out. All together, the five biggest Wall Street bank CEOs received $126 million in total compensation in 2017, and the average was $25 million. JPMorgan Chase & Co.'s James Dimon -- whose bank's $2.5 trillion balance sheet is about five times the size of AIG's -- was the highest paid of the five at $29.5 million. Each of those firms had a single chief executive for the year.

The changes at the top of occurred as the global insurance conglomerate continues to try to regain its luster in the wake of repaying a nearly $185 billion crisis-era bailout by U.S. taxpayers. AIG wrapped up repayment in 2012, after selling many of the most-profitable parts to raise cash. Since then, it has faced pressure to grow faster by activist investors Carl Icahn and John Paulson.

Also in Tuesday's proxy, AIG disclosed it is shrinking its board for the second straight year, to 11 from 16 in 2016 . Two directors aren't standing for re-election, as previously disclosed by AIG in regulatory filings, and no one is running to replace them, according to the proxy.

One of the departing directors is Samuel J. Merksamer, who joined the board in spring 2016 as part of an agreement between AIG and Mr. Icahn. The billionaire investor was one of the most vocal of AIG's shareholders in pushing Mr. Hancock to take aggressive actions to improve AIG's results, including splitting it apart. At the time, Mr. Merksamer was a managing director of Icahn Capital LP.

Since last spring, when Mr. Duperreault came on board, Mr. Icahn has thrown support behind Mr. Duperreault's hiring and new approach to reviving AIG's fortunes. Mr. Duperreault is aiming to expand AIG again, including through acquisitions. Like Mr. Hancock, he believes AIG is better off staying a conglomerate than breaking into property-casualty and life-insurance parts.

The other departing director is Peter R. Fisher, a senior fellow and lecturer at the Tuck School of Business at Dartmouth College and former head of fixed-income portfolio management of BlackRock Inc.

Last year, a trio of directors stepped down, including Mr. Paulson.

Liz Hoffman contributed to this article.

Write to Leslie Scism at leslie.scism@wsj.com

(END) Dow Jones Newswires

March 27, 2018 16:55 ET (20:55 GMT)

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