Transatlantic Holdings Inc. said retiring chief executive officer Robert Orlich will get a special payout that may be valued at as much as $15 million to ensure his "continued dedication" to the reinsurer.
Orlich, who announced his retirement plans in June, signed an agreement Nov. 20 entitling him to the award once he stops working at the end of the year, the regulatory filing last month shows. The executive, who spent 17 years at the helm of the New York-based reinsurer, struck the deal the same day Alleghany Corp. agreed to buy Transatlantic for $3.4 billion.
Transatlantic, once part of American International Group Inc., agreed to the payout “to foster a smooth transition of leadership and management,” according to the filing. Orlich, 64, gets a $6.1 million payment over the course of the 30 months following his retirement, as well as car lease payments and use of an office and administrative assistant for two years.
“It could be that he had planned to retire but they wanted to accelerate,” said Paul McConnell, an Orlando, Florida-based executive compensation consultant at Board Advisory LLC. “It’s not one of the prettiest things in executive pay but it happens all the time.”
Because Orlich is retiring Dec. 31, he isn’t eligible for a so-called golden parachute severance payment, which is only available to executives still working the day a sale is completed. His compensation package for 2010 amounted to $9.6 million, according to data compiled by Bloomberg.
Orlich led Transatlantic as it became independent from AIG, which divested its majority stake through public offerings in 2009 and 2010. The reinsurer struck a deal with Alleghany after rebuffing offers from Validus Holdings Ltd. and Warren Buffett’s Berkshire Hathaway Inc. Transatlantic’s plan to merge with Allied World Assurance Co. Holdings AG was scrapped in September as shareholders of Transatlantic opposed the deal.
Orlich declined to comment. He successfully led “the company through several challenging industry cycles,” according to a statement from Transatlantic.
“The compensation detailed in the proxy reflects the critical leadership role he has played in Transatlantic’s success and the implementation of our succession plan,” Transatlantic said.
The vesting of restricted stock, usually canceled when an employee quits before the vesting period ends, is part of Orlich’s special payout. The company estimated in April that the value of the restricted stock would have been $8.9 million if he had left in 2010, and it hasn’t provided an updated estimate.
Alleghany plans to make Orlich a senior adviser to the company and include him on the Transatlantic board once it becomes a subsidiary. It hasn’t struck agreements or disclosed pay arrangements for those roles.
Transatlantic’s shares rose 0.6 percent to $54.51 at 10:30 a.m. New York time. Before today they were little changed since Nov. 18, the last trading day before the deal’s announcement.