AIG doling out $100 million more in bonuses

By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- AIG is planning another round of bonus payments worth a total of $100 million for current and former employees of its troubled financial products division, according to the company.

The bailed out insurer will start paying out the bonuses this week to AIG Financial Products employees who had agreed to accept reductions to the amount of their bonuses. The bonuses were originally scheduled to be doled out in March.

After public furor over the bonuses erupted in the spring of 2009, AIG (AIG, Fortune 500) asked employees to voluntarily reduce the value of their scheduled bonus payments.

AIG spokesman Mark Herr said Tuesday that 97% of active employees of the Financial Products division along with many former employees volunteered to take a another reduction in their bonuses. That cut amounts to roughly $20 million.

That is in addition to the $45 million that, back in September, those employees said they would return. Though the cuts were voluntary, AIG reportedly told employees they would not receive their bonuses if they did not accept a haircut.

"We believe this allows us to largely put this matter behind us," said Herr.

AIG asked the Treasury Department's "pay czar" Kenneth Feinberg to review the retention payments due to the intense public scrutiny over them.

Feinberg had recommended to AIG that the bonuses not be paid out in full, but since those payments were issued before 2009, they are outside of Feinberg's jurisdiction. As a result, the pay czar did not make a specific recommendation to AIG about how much the insurer should reduce the payments.

"We are encouraged that AIG employees are making good on the repayment pledges they made last spring," said a Treasury spokeswoman.

The Financial Products employees wrote insurance contracts, called credit default swaps on highly complex financial instruments like mortgage-backed securities. The value of the underlying assets fell dramatically during the housing slump that led to the company's near collapse and subsequent $181 billion taxpayer-subsidized bailout.

The retention bonuses for the 400 employees of the Financial Products division were designed to keep the unit's staff on board to wind down the company's trillions of dollars in credit default swaps.

AIG scheduled the retention payments in three installments: $69 million in December 2008, $168 million in March 2009 and $198 million had been set to be paid in March 2010.

The insurer estimates that this last round of bonus payments was reduced to about $115 million due to some employees leaving the company and the voluntary cuts. That leaves $15 million that will be paid out in full in March unless AIG refuses to pay. To top of page

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