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Can AIG stop its CEO merry-go-round?

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(Bloomberg) — American International Group Inc.’s new chief executive officer can expect to deal with a volatile industry, pressure from ratings firms and a restless board. And if the past is any guide, the new leader won’t get an industry-leading compensation package for the trouble.

Peter Hancock, who is staying on until a successor is found, had reported compensation of $12.5 million in 2015, among the lowest for CEOs at industry peers. Dan Glaser, the head of broker Marsh & McLennan Cos. who is seen as a potential replacement at AIG, got $15.6 million. Mike McGavick received $12.7 million from XL Group Ltd. and told staff there that he isn’t interested in the AIG job.

Related: AIG CEO Peter Hancock to step down: What’s next?

“I doubt you would be able to attract AIG’s next CEO from an already-top-performing property-and-casualty insurer or insurance broker,” Jay Gelb, an analyst at Barclays Plc, wrote in a March 15 note. “Why would they give up their current role and deal with a turnaround situation?”

Hancock will be the sixth CEO to leave New York-based AIG since 2005. Much of their efforts in that span have involved resolving regulatory probes and lawsuits, negotiating federal bailouts and selling assets — the sort of roles that aren’t usually associated with big pay raises. It didn’t help Hancock that the company has been unprofitable in four of the last six quarters.

The new leader will need to restore credibility to a company that missed profit targets and has been draining talent for a decade. John Heagerty, an analyst at Atlantic Equities, said the job may even involve breaking up the company, a plan previously advocated by activist investor Carl Icahn.

Related: AIG sells interest in specialty insurance underwriter for $1.1B

Given the difficulty of the role, and the limited number of executives with the relevant experience, AIG should be prepared to pay top dollar, the analyst wrote in a March 15 note, saying the company’s best choices might be Glaser and John Keogh, the chief operating officer at Chubb Ltd. Both are former AIG executives.

‘Incredibly demanding’

“The job is incredibly demanding and possibly the most complicated within the property-and-casualty industry,” given the company’s global reach, diversity of operation and recent history of losses after determining repeatedly that reserves were inadequate, Heagerty said in a note to investors last week. “With a high level of expectation for any incoming CEO, there is a question as to whether any new CEO could truly succeed. As such, any new CEO is likely to command a substantial remuneration package.”

A spokesman for Glaser at Marsh & McLennan declined to comment, as did a spokesman at Chubb, which paid Keogh about $7.5 million in 2015.

Hancock was promoted to CEO in 2014, and his annual incentive was slashed by 29 percent the following year for missing profitability goals. Results in 2016 were hurt by a fourth-quarter charge of $5.6 billion to fill a reserve shortfall for swelling costs on policies written in prior years, some before Hancock even joined the company. The insurer was downgraded by S&P Global Ratings in January and is under review at A.M. Best, an industry ratings firm.

‘Function of performance’

“It’s simply a function of performance,” Meyer Shields, an analyst at Keefe, Bruyette & Woods, said about the CEO’s pay relative to peers. “Most companies can put up returns on equity bordering 10 percent, 9 percent. But AIG obviously has not done that.” The company hasn’t yet filed its proxy statement with complete details of Hancock’s 2016 compensation.

Under Hancock, AIG outperformed the S&P 500 Index until activist Icahn began agitating for changes in October 2015. The CEO resisted the billionaire’s demand to break AIG into three separate companies, opting instead to cut jobs to boost returns and sell units to generate funds for share buybacks.

Icahn’s firm won board representation, and he even publicly praised Hancock for a while. But the board became frustrated as claims costs escalated, the CEO lowered profitability targets and the stock missed out on the 2017 rally in financial firms. Icahn supported the exit of Hancock when he announced his plan on March 9 to depart. Icahn’s firm didn’t respond to a message seeking comment on the CEO search. AIG declined to comment.

For all the pressure of running AIG, the role was “the most stimulating job in America,” Ed Liddy said in 2009, when he announced that he would depart as CEO. After all, the post offers the chance to help some of the world’s largest companies manage risks from cyber-hacking to earthquakes.

And whoever steps in will have two advantages that Liddy didn’t, when he was appointed in 2008. The company is no longer owned by taxpayers, and the salary will be more than the $1 a year that Liddy was paid.

See also:

AIG set to sell mortgage guarantor to Arch for $3.4 billion

AIG dealmaker Schreiber exits with Maag as insurer shrinks


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