Page last updated at 01:29 GMT, Sunday, 15 March 2009

AIG to cut future bonus payments

AIG sign
AIG insures financial institutions around the world

Troubled US insurance giant AIG says it has agreed to demands from the Obama administration to restructure its bonus payments to staff.

Bonuses for top executives are to be sharply cut in 2009, AIG's Chairman Edward Liddy wrote in a letter to US Treasury Secretary Timothy Geithner.

Bonuses agreed to in 2008 would be paid because they are legally binding.

AIG has received bailouts from the US government totalling $180bn (129bn) since coming close to collapse in 2008.

It is believed to be the biggest-ever government rescue of a US company.

American International Group (AIG) plays a key role in insuring risk for financial institutions around the world and was deemed to be too import to fail.

'Hands tied'

In the letter, Mr Liddy said he had come under pressure from Mr Geithner to reduce the firm's bonus payments.

30 million US policy holders
Operates in 130 countries
Provides insurance to 100,000 companies and other entities

He said bonuses agreed to in 2008, before the firm's problems became known, could not legally be blocked.

"Quite frankly, AIG's hands are tied," Mr Liddy said in the letter.

"Under the current circumstances, I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them."

AIG had promised to pay hundreds of million of dollars in bonuses to staff.

Mr Liddy and six other executives have agreed to decline bonuses, the Associated Press news agency said.

AIG would do its best to cut bonuses by at least 30% in 2009, Mr Liddy wrote to Mr Geithner.

Mr Liddy was appointed chairman of AIG by the Treasury Department in September last year, after the initial government bail-out of the firm.

The Treasury now holds up to 79.9% of AIG.

AIG reported a $61.7bn quarterly loss earlier in March. The figure, for the last three months of 2008, is the biggest quarterly loss in US history.

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