Oct. 1 (Bloomberg) -- American International Group Inc. dismissed McKinsey & Co. as an adviser for the bailed-out insurer’s restructuring as Chief Executive Officer Robert Benmosche seeks to trim consulting fees, said two people familiar with the matter.

McKinsey worked on a review of AIG businesses that started in March under Benmosche’s predecessor, Edward Liddy, said the people, who declined to be identified because the decision wasn’t public. The plan was to produce a multiyear road map, called Project Destiny, to restructure the company after it took a U.S. rescue valued at $182.5 billion. Mark Herr, an AIG spokesman, and Yolande Daeninck of McKinsey declined to comment.

The insurer has “too many” advisers because managers “forget to look in our own backyard for skills,” Benmosche told employees of New York-based AIG in August, according to a record obtained by Bloomberg. “I am busy getting lists of bankers, lists of lawyers, how many consultants we have.”

Benmosche, who started as CEO on Aug. 10, has said he would come up with his own “vision” of which parts of AIG should be kept and that he will rebuild businesses before selling them to repay bailout loans. A week after taking over, he pulled the auction of an investment advisory unit because it complements AIG’s retirement business.

“Project Destiny is going to become dusty, and they will dust it off someday in the future,” Benmosche told employees. “What I want to do is create a vision for all of us. If you were me, would you want to sell all the parts right away or would you wait until the parts get bigger than the whole?”

Benmosche’s Plan

Benmosche has also said he wanted to cut in half the fees paid to Wall Street banks to take AIG units public. The insurer said it will hand over stakes in its two biggest overseas life insurance units, American International Assurance Co. and American Life Insurance Co., to the government to reduce its Federal Reserve debts by $25 billion. The non-U.S. units may be sold to competitors or in public offerings.

AIG, which has secured agreements to sell about $9.8 billion in assets in the past year, has been getting advice from banks including Morgan Stanley, Blackstone Group LP, Goldman Sachs Group Inc. and JPMorgan Chase & Co.

AIG designated New York-based Morgan Stanley and Deutsche Bank AG joint global coordinators of the planned IPO of American International Assurance, a Hong Kong-based life insurer. The initial share sale may raise some $8 billion for AIG, people familiar with the matter said in May.

Credit Line

AIG owes more than $38 billion on a Federal Reserve credit line. The $182.5 billion bailout includes a $60 billion Fed credit line, a Treasury Department investment of as much as $70 billion and $52.5 billion to buy mortgage-linked assets owned or backed by the company.

The New York Fed has hired Ernst & Young LLP to advise on the dismantling of AIG at a rate of $775 an hour per person for work done by partners or executive directors, according to documents from the accounting firm released July 17. The firm may earn as much as $60 million, the records say, an increase of 50 percent from the initial agreement.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: October 1, 2009 00:00 EDT