AIG Inc. increases dividend, CEO Benmosche plans layoffs

February 14, 2014 9:24 am

The Chief Executive Officer of American International Group Inc. – Robert Benmosche – is increasing returns for the company’s shareholders as he plans layoffs to lean the company’s structure.

American International Group Inc. announced that it has increased its quarterly dividend by 25% to 12.5 cents a share. Another 1 billion dollars in stock buybacks was authorized yesterday as the company posted its profit for the fourth quarter, which topped analysts’ estimates. The company also revealed that about 3% of its workforce is to be eliminated, primarily at the property-casualty business.

Chief Executive Officer Robert Benmosche said in a memo to the company’s employees, which was cited by Bloomberg: “I realize that this news about changes to the organization is hard, but such changes are making a difference. 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.”

Over the last few years, Chief Executive Officer Benmosche has been focused on simplifying the company and reducing its expenses. Some of AIG’s units were disposed of in order to facilitate the company to repay a U.S. bailout in 2012. Some of the company’s workers were shifted to lower-cost locations in the U.S. and overseas under Mr. Benmosche, who explained in a statement that those changes created duplicate roles that had to be cut.

American International Group Inc.’s CEO said in an interview for Bloomberg: “We’re moving people out of some higher-cost cities into those lower-cost cities in America and some offshore as well. Part of this is nothing more than dealing with the dual jobs.”

Mr. Benmosche also explained in the interview with Betty Liu that layoffs are part of the company’s effort to decrease management layers and reduce the number of approvals needed for no more than five. During the fourth quarter, 265 million of pretax severance costs were recorded by American International Group Inc. According to a person with knowledge of the matter, who asked not to be named because these details are still private, American International Group Inc. forecasts eliminating about 1,500 jobs.

The net income announced by American International Group Inc. for the fourth quarter was 1.98 billion dollars. It brought a full-year profit estimated to 9.09 billion dollars.

One of the analysts working for Sandler O’Neill & Partners LP said in a research note cited by Bloomberg: “AIG management understands that it must reduce expenses in its property-casualty unit in order to achieve consistent underwriting profits. We anticipate investors will be pleased with the quarter’s financial results.”

American International Group Inc.’s shares rose by 1.12% on Thursday to settle at $49.59, marking a one-year change of +27.58%. According to CNN Money, the 19 analysts offering 12-month price forecasts for American International Group Inc. have a median target of $58.00, with a high estimate of $64.00 and a low estimate of $49.00. The median estimate represents a +16.96% increase from the last close.

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