Bailed out insurer American International Group Inc’s global property-casualty division, Chartis, has not seen an exodus of employees because of pay limits imposed by Washington, the unit’s chief financial officer said on Thursday.
Robert Schimek praised AIG Chief Executive Robert Benmosche — who reportedly was distressed enough about pay curbs to threaten to quit recently — for standing up for employees.
“That’s just Bob saying ‘I want to get it right for these people,”‘ said Schimek, who has known Benmosche for many years, having worked closely with him on MetLife Inc’s initial public offering earlier this decade.
AIG’s property-casualty unit was renamed Chartis Inc. in July as part of an effort to avoid being linked with the now-tarnished reputation of AIG.
Schimek, speaking on the sidelines of an insurance conference held by Ernst & Young in New York, estimated that about one-fifth of the 100 senior managers affected by the pay restrictions work for the global property-casualty division. “These people have been fully communicated to” about the pay restrictions, he added. Chartis employees are taking the furor over pay as best as one can, he said. “We are used to it.”
The Obama administration’s pay czar, Kenneth Feinberg, said last month that renegotiating compensation for some AIG employees was a “top priority.”
On Wednesday, Benmosche sent a letter to employees to downplay any concerns that his frustrations over compensation had reached a breaking point. “Let me be clear: I and the Board remain fully committed to leading AIG,” he said in the letter.
While Chartis has suffered a number of high-profile departures since AIG’s bailout last year, Schimek said employee departures had not weakened the insurer, but created room for others to take bigger roles.
Chartis employs about 34,000 around the world, and with a net worth of about $40 billion, is one of AIG’s largest divisions. “We are as determined a competitor today as we were in August 2008, before the AIG event,” he said.
For Schimek the biggest concern is no longer being dragged down by AIG’s reputation but what Chartis can do to buck challenging economic headwinds and preserve profitability.
He said where rivals undercut Chartis at unprofitable rates to win business, the company cuts its losses rather than provide coverage. “There are pockets of the business that we think are too aggressive,” said Schimek.”We will walk away from the business … to preserve bottom-line profitability.”
Insurers have been grappling with the effects of continued unemployment and a contraction in spending. The problem has been compounded by an ongoing decline in policy pricing, driven by zealous players seeking greater market share.
Schimek said Chartis, contrary to competitors’ claims, is not guilty of such destructive business practices.
AIG nearly collapsed more than a year ago because of risky investments within its financial products unit, necessitating a massive taxpayer bailout, including more than $80 billion in loans from the U.S. Federal Reserve and Treasury.
(Reporting by Lilla Zuill; Editing by Andre Grenon, Phil Berlowitz)