(Bloomberg) – American International Group Inc. will give Brian Duperreault $12 million in cash, 1.5 million stock options and an annual pay package valued at $16 million to turn around the company as its seventh chief executive officer since 2005.
AIG will also pay Duperreault's previous employer, Hamilton Insurance Group, as much as $40 million over two years to waive their former CEO's non-compete agreement, according to a regulatory filing Monday.
|Deputy to Hank Greenberg
Duperreault, 70, spent time at AIG earlier in his career as a deputy to Maurice “Hank” Greenberg, who built the company into the world's largest insurer before departing in 2005. Duperreault will begin immediately, AIG said in a statement. He succeeds Peter Hancock, who said in March he would leave because of insufficient support from investors such as activist Carl Icahn.
The new CEO will seek to bring stability to AIG, which has endured the departures of top executives, higher-than-expected claims costs and four losses in seven quarters. Before joining Hamilton, he was CEO of insurance broker Marsh & McLennan Cos., where he helped restore confidence of investors and clients. He also led Ace Ltd., which is now known as Chubb Ltd. and is one of AIG's largest rivals.
“It is extremely gratifying that the activist strategy continues to create value for all shareholders,” Icahn said in a Twitter post Monday, adding that he was pleased AIG was making “much-needed” changes he's been advocating.
|Salary, target bonus & restricted shares
The annual pay comprises $1.6 million in salary, a $3.2 million target bonus and an $11.2 million long-term incentive consisting of restricted shares, some of which are linked to performance. Taken together, that's 23 percent more than Hancock's $13 million target annual pay.
Of the 1.5 million options, Duperreault will get a third within three years and the remaining will vest in increments if AIG's share price exceeds hurdles set $10, $20 and $30 above its current level.
AIG also agreed to pay about $110 million to acquire a U.S. operation from Hamilton, which includes a $30 million premium to the book value of the Bermuda-based firm. AIG will allow Hamilton the chance to collect about $150 million of reinsurance premiums over six years. AIG said it will work with hedge fund firm Two Sigma Investments, which already works with Hamilton, to create a “next generation insurance platform” for Duperreault's new company.
Duperreault helped create Hamilton in 2013 with backing from principals of Two Sigma. Former Citigroup Inc. CEO Sanford “Sandy” Weill had a stint as Hamilton's chairman and remained a shareholder when he stepped down from the board.
|'Real innovator'
Duperreault “has an excellent grasp of the global insurance industry and he has proven to be a real innovator over many decades,” Weill said in an email. “He views change as creating opportunities, and I really believe that we will see good things from AIG as a result of Brian's leadership.”
Hamilton focused on data analytics with Two Sigma to help decide which insurance risks to take, and how much to charge for them. The company formed a venture last year with AIG to provide coverage to small- and medium-size businesses.
Duperreault will seek to improve return on equity, and also boost AIG's stock price. Shares of the company have slumped 6.6 percent this year, while the S&P 500 Index has climbed 6.8 percent.
|Right size for AIG?
He will need to decide the right size for AIG, which has been shrinking for years through asset sales. Icahn sought a breakup when he disclosed a stake in AIG in late 2015, and the billionaire has representation on the insurer's board. Chairman Doug Steenland said earlier this year that a split would compromise the company's global reach, and that the plan is to continue returning capital to shareholders and cutting expenses.
AIG has returned more than $18 billion to shareholders since Hancock announced in early 2015 that he had a two-year target for $25 billion. AIG has struck reinsurance deals to limit risks at the P&C operation, and the company has sold $91 billion worth of assets since he joined in 2010. Recently, the insurer has exited some operations in Brazil, Turkey, Japan and the U.K., while also divesting a mortgage guarantor.
Hancock became CEO in 2014.
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