The financially troubled and taxpayer-financed American International Group Inc. last week reported a net loss for 2009′s first quarter of $4.35 billion, an improvement from the $7.81 billion net loss in the same period a year earlier.

The first-quarter net loss "resulted primarily from a number of restructuring and market disruption-related charges and accounting charges related to taxes," the company explained.

AIG's commercial insurance units reported net premiums written during the first quarter of $4.2 billion–down 18.3 percent compared to the year before. "The decline was driven by the effect of the economic downturn on construction, real estate and transportation-related business, and commercial insurance's deliberate strategy to remain price-disciplined in workers' compensation, as well as changes in the amount of premiums ceded to reinsurers," the company said.

However, AIG conceded that "net premiums written were also adversely affected by the negative AIG publicity and the broader impact of the economy, which is decreasing ratable exposures on renewal business and limiting new opportunities across other lines of business."

AIG said "the retention of existing business was moderately lower than in the comparable prior-year period, with some de-risking among clients, although retention levels have shown improvement since the end of the first quarter of 2009."

Meanwhile, although AIG is only paying a $1 annual salary to its chief executive officer, Edward Liddy, the financially troubled company filed an amended annual report revealing that he received $460,411 in work-related benefits last year.

Mr. Liddy had been scheduled to appear before the House Oversight and Government Reform Committee on May 6 to respond to queries about whether the company will need more federal funds to stay afloat, but due to AIG's release of its first-quarter earnings report on May 7, that appearance was postponed until May 13.

The company–in its 10-K/A filing with the Securities and Exchange Commission–said Mr. Liddy received:

o $47,578 to pay his air commutes from his Chicago home to AIG's New York headquarters.

o $38,368 for a New York apartment to house Mr. Liddy.

o $31,348 for car service.

o $180,431 toward his taxes.

AIG also paid Mr. Liddy's attorney $162,686 for work "to develop appropriate compensation structures for Mr. Liddy and other AIG senior employees in the current circumstances."

In the past, AIG said it has provided club memberships and recreational opportunities for its executives, "but Mr. Liddy has not participated in these club memberships or recreational opportunities, and AIG has now largely eliminated payments for them."

The report also noted that rather than use a corporate jet, Mr. Liddy generally used commercial air travel to commute.

In addition, "although an equity arrangement for Mr. Liddy was substantially negotiated, Mr. Liddy has now stated that he does not think it would be appropriate to enter into the proposed arrangement and has declined to move forward with it, especially in light of changing business, regulatory and legislative considerations," the report said.

AIG said the payments to offset any tax obligation Mr. Liddy incurred for his transportation, living and legal expenses were made "to avoid his effectively having to pay to work at AIG. AIG does not believe that any of the amounts described in this paragraph represents an actual compensation benefit for Mr. Liddy."

The report said the company's chief restructuring officer, Paula Rosput Reynolds, had worked on a voluntary basis in 2008, but for 2009 "Ms. Reynolds has a salary of $900,000, which was approved by the committee with the input of Mr. Liddy."

The report noted that she is paid less than when she served as Safeco CEO. Ms. Reynolds's compensation in 2009 was expected to be tied directly to the progress of restructuring efforts, although this initiative may be affected by the American Recovery and Reinvestment Act bailout legislation.

As for his congressional testimony this week, a source familiar with the issue–who asked for anonymity because they were not authorized to speak–said Mr. Liddy agreed to testify only after being told he would be subpoenaed if he did not agree to appear. An AIG representative declined to comment about whether Mr. Liddy was advised he would be subpoenaed.

During the hearing, Mr. Liddy is expected to be asked what caused the downfall of AIG, what has been done with federal bailout funds, and whether federal financial assistance was the only step that could have saved the company, as well as whether more federal funds will be needed.

Special Reports /

AIG Reports $4.35B First-Quarter Loss; Reveals $460K To Cover Liddy Expenses

Related Stories

Recommended For You