Subprime Mess Cuts Into Insurers’ CEO Compensation
The subprime mortgage debacle is seeping into various segments of industry, including the compensation of some of the leaders of the insurance industry, according to regulatory filings from companies in the S&P insurance index.
American International Group Inc. cut the 2007 cash bonus for Chief Executive Officer Martin Sullivan by 42 percent as the world's largest insurer reported its biggest quarterly loss in 89 years. Ambac Financial Group Inc. denied Robert Genader any bonus, slashed his cash compensation by 71 percent and then replaced him in January. The reduction was the most of any insurer in the Standard & Poor's 500 Insurance Index.
Boards are holding CEOs accountable for $38 billion of subprime losses by slicing their salaries and bonuses by an average 20 percent. This compares with an average 8.2 percent increase for the CEOs in 2005, when directors excused them for $41.1 billion of costs from Hurricane Katrina, the most expensive disaster in U.S. history.
"Fewer and fewer companies are willing to pay bonuses in a bad year,'' said Richard Furniss, an executive compensation consultant at Stamford, Connecticut-based Towers Perrin, who tracks insurance companies. "There's too much liability, too many red faces, and too much bad publicity for the directors if they do that.''
Twelve of 20 insurers in the S&P index that have reported CEO compensation so far paid CEOs less in salary and bonuses in 2007, regulatory filings show. Bermuda-based Ace Ltd. hadn't filed its annual proxy statement with executive compensation data as of the close of business yesterday.
Published on April 11, 2008
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