AIG boosted its quarterly dividend by 25 percent to 12.5 cents a share and authorized another $1 billion in stock buybacks yesterday as it posted fourth-quarter profit that beat analysts’ estimates. The New York-based insurer said it would eliminate about 3 percent of its workforce, primarily at the property-casualty business.
Benmosche, 69, has been working to simplify AIG and reduce expenses after divesting units to help repay a U.S. bailout in 2012. He’s been shifting some employees to lower-cost locations in the U.S. and abroad, and said yesterday that those changes created duplicate roles that had to be cut.
“We’re moving people out of some higher-cost cities into those lower-cost cities in America and some offshore as well,” Benmosche said in an interview on Bloomberg Television with Betty Liu. “Part of this is nothing more than dealing with the dual jobs.”
Benmosche said eliminating jobs is part of an effort to reduce management layers and cut the number of approvals needed for decisions to no more than five. AIG recorded $265 million of pretax severance costs in the fourth quarter, mainly at the property-casualty unit.
AIG expects to eliminate about 1,500 jobs, according to a person familiar with the matter who asked not to be identified because the figure isn’t public.
“I realize that this news about changes to the organization is hard, but such changes are making a difference,” Benmosche said in a memo to employees. “While AIG today is a more agile and focused company, I think we would all agree that there is still work that needs to be done.”
Fourth-quarter net income was $1.98 billion, bringing full-year profit to $9.09 billion, AIG said. Results improved at the property-casualty and life units. Still, the P&C business’s underwriting loss was $330 million in the quarter.
“AIG management understands that it must reduce expenses in its property-casualty unit in order to achieve consistent underwriting profits,” Paul Newsome, an analyst at Sandler O’Neill & Partners LP, said yesterday in a research note. “We anticipate investors will be pleased with the quarter’s financial results.”
AIG had advanced 28 percent in the past 12 months through yesterday’s close of regular trading in New York, beating the 20 percent gain of the Standard & Poor’s 500 Index.
AIG had about 63,000 employees at the end of 2012, with 45,000 at the property-casualty operation. The insurer was the world’s largest five years earlier and employed 116,000.
Benmosche has warned employees against buying homes in the New York area as he weighed moving jobs, people familiar with the matter said last year. Yesterday, he cited Texas, Tennessee and Kansas among the lower-cost places to employ workers.
The company said in a 2011 filing that it was targeting $1 billion of cuts to general and administrative expenses by the end of 2015, compared with 2010 levels. The insurer also set a goal of achieving an underwriting profit of 5 cents to 10 cents for every premium dollar earned at the property-casualty unit.
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