AIG American International Group Inc

By Leslie Scism 

American International Group Inc. Chief Executive Peter Hancock's total compensation fell 23% to $9.58 million last year as the global insurance conglomerate suffered setbacks in its profit-improvement plan.

Mr. Hancock has since resigned from the firm but remains at the helm until a successor is named. He came under pressure from the board as it feared a potential fight with billionaire investor Carl Icahn if he wasn't replaced.

In a regulatory filing Thursday, AIG's board also disclosed that hedge-fund manager and large shareholder John Paulson is leaving the board "due to his other time commitments," while Samuel Merksamer, a representative for Mr. Icahn, is standing for re-election.

Both men joined the board last spring as AIG sought to avert a public fight with the activist investors over ways to boost shareholder returns. Mr. Paulson's Paulson & Co. hedge fund sold nearly half its shares in the fourth quarter but still owned 4.55 million shares as of March 15, according to the AIG filing.

For much of last year, AIG was making headway in improving its profit margins, but the insurer closed the year with one of its biggest quarterly losses since the financial crisis.

Mr. Hancock earned a base salary of $1.6 million, the same as in 2015, though the year-earlier compensation included an extra payroll period to make it $1.66 million.

The CEO received no short-term-incentive pay compared with year-earlier short-term incentive pay of $2.5 million. Mr. Hancock did earn a long-term stock award, which is based primarily on share performance compared with peers as measured over a three-year period. Granted in March 2016, it totaled $7.85 million, down 4.6% from the year before.

As previously reported, the board agreed to pay Mr. Hancock $5 million for his services during the transition period this year and an additional $9.53 million as severance, on top of his regular salary and incentive pay for 2017. The executive also will exit with an estimated $38.3 million in unvested stock awards, which were awarded between 2013 and 2016.

The exact amount payable from those stock awards depends on AIG's share performance versus peers over the next several years. That means Mr. Hancock's financial payout is tied partly to how well his successor handles the job.

In a recent shareholder letter, nonexecutive Chairman Douglas Steenland said the board "is actively engaged in the process of identifying the right individual to serve as CEO."

AIG's board will shrink to 13 directors from the current 16, as two other directors also won't stand for re-election: George L. Miles Jr. and Robert S. Miller, both in connection with reaching the board's general retirement age of 75. Mr. Miller, who joined AIG's board in 2009 when it was struggling to repay a nearly $185 billion U.S.-taxpayer bailout, served as AIG's nonexecutive chairman from 2010 through mid-2015.

While Mr. Hancock received no short-term incentive pay, the board awarded more than $680,000 each to four top lieutenants. The board cited the company's success in cutting costs and generating more than $10 billion in planned or completed transactions to help fund share buybacks.

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

(END) Dow Jones Newswires

April 13, 2017 17:01 ET (21:01 GMT)

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