NEW YORK (Bloomberg) — American International Group Inc., the insurer that's promised more than $450 million to employees to get them to stay, has lost at least 20 managers to competitors including several Bermuda companies.

Hiscox, Ironshore, Arch, Ace and Validus have all taken advantage of the drain of talent from the embattled giant to bolster their own senior staff, as have European competitors Zurich Financial Services and Allianz SE.

The defections may lend credibility to chief executive officer Edward Liddy's claim that he needs to pay employees extra to remain on the job as he tries to sell units and repay a government loan. A worker may receive four times annual salary, with the highest award totaling $4 million. As many as 7,000 people may get payments, said a person familiar with the matter.

"There have certainly been defections, but overall we think it's been successful in maintaining the continuity of our leadership during a very unstable time," AIG spokesman Nicholas Ashooh said of the retention payments.

Rivals have wooed AIG executives with expertise in areas including aviation, terrorism and environmental risk, or those with a stable of client relationships. Defectors include Mark O'Dell, who stepped down as manager of AIG's Singapore life- insurance operations to go to Manulife Financial Corp., Kevin Kelley, now CEO of Ironshore, and three hires announced by Zurich.

"We're in the market for talent," said Mike Foley, CEO of Zurich's North American commercial-insurance operations, who declined to discuss AIG executives specifically. "We've had much better access to, and discussions with, talent across the industry and have actually found on the offers that we have made that people are quite willing to move. We've had some real success there."

Hiscox Ltd., the Bermuda-based insurer that's expanding in the US, said last week it hired two AIG employees as vice-presidents at units covering terrorism and construction, after saying on December 17 it hired two others for its management liability team. Validus Holdings Ltd. said last week it was launching a technical property insurance unit after making an AIG hire.

Lawmakers including US Representative Elijah Cummings, a Democrat from Maryland, have criticised the retention pay, saying AIG under-reported the number of people who were getting the payments and that it's unnecessary to give so much cash when job markets are weak. US finance companies have announced 220,506 job cuts this year through November, placement firm Challenger Grey & Christmas Inc. said in a December 3 report.

"Most companies would say in this environment that they can use the rifle-shot approach as opposed to a shotgun," said John Gayley, a consultant at Stamford, Connecticut-based Towers Perrin, who advises financial firms on executive pay. "We don't have to do something for everybody in order to keep the people we absolutely have to keep."

AIG needs to repay a $60 billion US loan, part of a $150 billion rescue package intended to prevent losses at companies that did business with the insurer. The company posted more than $60 billion in losses and writedowns on bets tied to mortgages.

AIG said yesterday it was selling its Hartford Steam Boiler unit to Munich Re, the world's largest reinsurer, for $742 million to help pay back the US Hartford Steam Boiler CEO Douglas Elliot will stay on to run the business.

AIG has already agreed to sell AIG Private Bank, a unit catering to wealthy clients in Asia and the Middle East, to Abu Dhabi-based Aabar Investments PJSC for 307 million Swiss francs ($279 million). It is also selling a stake in an insurance joint venture in Brazil for $820 million.

AIG, once the world's largest insurer, operates in more than 100 countries and sells life, health and accident protection to individuals and businesses. It insures against some of the biggest risks, insuring planes and commercial shipping and providing coverage against terrorist attacks.

Assistant Treasury Secretary Neel Kashkari, who supervises the US financial rescue programme, has called some of AIG's payments to workers "excessive for a failing institution".

Standard & Poor's cited the prospect of employee departures on November 5 when the ratings firm said it was considering cutting credit ratings on AIG subsidiaries.

Liddy has said that managers are among the chief assets at the units that AIG is hoping to sell to repay loans included in the government rescue package, which now totals about $150 billion and entitles the US to a 79.9 percent ownership stake.

"You have to keep those people in place," Liddy said last week in an interview with CNBC, adding that it was not AIG's intention to hide information about the payments. "If you don't use retention bonuses, those people are some of the best in the insurance industry, they will go elsewhere and we won't have anything to sell."

The following table, listing employees who have departed since AIG was rescued by the US government in September, was compiled from company statements and news reports.

Company Name New role Date announced

Ace Ltd. Nikolay Dmitriev Country Manager, Russia Oct. 29

Ace Ltd. Chris Strong Environmental risk underwriter Dec. 16

Allianz Will Lovett Executive team, aviation unit Oct. 17

Arch Gordon Kerr CEO, Canadian operations Nov. 14

Berkley John Benedetto President, professional liability Oct. 14

Berkley Paul Brophy SVP, professional liability Oct. 14

Berkley Frank Costa President, energy risks unit Oct. 28

Berkley Steven Walsh EVP, professional liability Oct. 14

Hiscox Robert Cruz VP, US terrorism underwriting Dec. 22

Hiscox Bob Gadaleta SVP, management liability Dec. 17

Hiscox Chris Leisz SVP, management liability Dec. 17

Hiscox John Tutera VP, construction property Dec. 22

Ironshore Kevin Kelley CEO Dec. 9

Ironshore Shaun Kelly Head of US operations Dec. 9

Manulife Mark O'Dell Head of Taiwan operations Sept. 26

Philadelphia Susan Doering VP, environmental underwriting Nov. 12

Validus David Hawksby CEO, new technical lines unit Dec. 22

Zurich Kevin Hogan Head of US life operations Nov. 26

Zurich Kevin Whitehead Head of US excess casualty Oct. 28

Zurich Philip Wilson Chief underwriter, global life Oct. 6

Source: Bloomberg News