American International Group announced plans this morning to cut more than 20% of executive positions at the company on the heels of a poor third-quarter performance.
In a scheduled call to investors,
AIG President and CEO Peter Hancock said the insurer would shed 23% of its current 1,400 senior management employees in a restructuring that will emphasize efficiency. The cuts will affect roughly 300 to 400 top-level managers with more to follow in 2016, a source told the
Wall Street Journal.
The announcement follows a third-quarter earnings report in which the insurer reported a net loss of $231 million, down significantly from a net income of $2.19 billion during the same period last year. Losses were concentrated in commercial property/casualty units as well as automobile liability – particularly in those policies sold to hospitals and other healthcare facilities.
Hancock attributed the loss to lower income from hedge fund investments as well as the volatility of certain global markets.
He also rejected calls from shareholders Carl Icahn and John Paulson to break up AIG into three pieces as a way to boost stock and avoid federal regulations.
“I remain confident in our strategy,” Hancock said in a memo to employees Monday. “We continue to move forward with a sense of urgency.”
Along with the job cuts, AIG plans to exit from certain low-return lines of business in order to save a projected $400 million to $500 million a year. Hancock did not specify which lines these were, but told employees he plans to “narrow our focus on businesses where we can grow profitably.”
