AIG's New CEO Tries To Cut Banking Fees

 

Friday, Sep 04,2009, 9:40:00 AM   Click:

SAN FRANCISCO (Reuters) - American International Group Inc. chief executive Robert Benmosche attempts to reduce the investment banking fees that the insurer pays the giant corporations, including Morgan Stanley, according to a media report Wednesday.

Benmosche also wants to reduce the number of outside consultants and counsel of AIG (AIG) uses, Bloomberg News reported.

Benmosche said investment bankers during a presentation fee of the transaction under discussion would be 1% of the amount raised, instead of 2% to 2.5%, Bloomberg said, citing recording an August 11 staff meeting.

Benmosche also said he wants to rein in the fees charged by attorneys and consultants, Bloomberg added.

"I am busy getting lists of bankers, lists of lawyers, how many consultants we have," Benmosche told employees at the meeting in Houston, according to Bloomberg. "We forget to look in our own backyard for skills," because managers feel "we need the consultants," he said. "I think we have too many."

AIG spokeswoman Christina Pretto declined to comment.

AIG shares climbed 9% to $39.25 during afternoon trading on Wednesday. The stock has plunged roughly 90% in the past year.

AIG almost collapsed last year and had to be bailed out with more than $150 billion in government support. The company is now roughly 80% owned by the government and is trying to find a way to repay what it owes and return to the private world.

Initially, under CEO Edward Liddy, AIG planned to sell assets quickly to repay the government. However, the broader financial crisis made that difficult because potential buyers couldn't borrow money easily to pay for what the insurer was offering.

Since taking over in August, Benmosche has scrapped some parts of the strategy, arguing it's better to hold on to some businesses for several years rather than sell at potentially distressed prices.

However, AIG may still proceed with planned initial public offerings of some of its overseas businesses.

Morgan Stanley (MS) has been selected as an adviser on any transactions involving the Federal Reserve. The firm and rival Deutsche Bank (DB) were picked to organize the IPO of American International Assurance Co, AIG's Asian life insurance business.

AIG has also been getting advice from Blackstone Group LP (BX) , Goldman Sachs (GS) and J.P. Morgan Chase (JPM) , Bloomberg reported Wednesday.

A spokeswoman for Morgan Stanley declined to comment.