(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.
“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.
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.
“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.