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AIG To Spend $300 Million On Severance Packages As It Axes Management

The insurance company AIG is looking to spend almost $500 million as a part of its simplification and restructuring plan. The majority of the expense is expected to be paid as severance packages to the company’s management who is about to get the ax. Part of the simplification was to get rid of a lot of the company’s middle management by removing processes and other activities that kept them at work.

AIG To Spend $300 Million On Severance Packages As It Axes Management

AIG Headquarters

AIG is undergoing some significant restructuring at the tune of $500 million. (Image from Wikipedia)

AIG has been seeing a strong decline in income from it’s Property & Casualty insurance business, and shareholders may be nervous about extreme expenses that the company has been incurring due to restructuring. The restructuring effort has caused a significant enough cash outlay that Q3 2015 posted a negative earnings on the company’s books. Even with the removal of the restructuring costs, the company is showing a huge decline in income though remaining profitable.

The company plans to lay off more employees in 2016 as it thins the heard, but not all of the employees should be expecting to get their share of the $300 million pool. Most of the money will likely go to upper management who currently carry the larger salaries, and are likely to get the biggest pieces of the proverbial pie.

After all is said and done, AIG is expecting that this restructuring effort will save the company more the $400 million annually in operating expenses. That lean of an enterprise ought to be able to better weather the financial ups and downs of the insurance business.

Shareholders may be put off by the measly dividend per share expected to be paid for Q3. An earnings of roughly $0.28 per share is almost 1/10th the average expected margin for the company’s stock. If shareholders can wait out the current initiatives they may be able to see healthier gains in the future.

AIG To Spend $300 Million On Severance Packages As It Axes Management.

About Steven Kenniff

Lives in Phoenix, AZ. Graduated from Arizona State University in 2005. Writes for American Live Wire, GM Roadster and Northstar Media