CFO departs in a shake-up at AIG

American International Group Inc., the giant insurer being pressured by activist investor Carl Icahn to boost returns, said chief financial officer David Herzog was among top managers leaving the company as chief executive officer Peter Hancock shakes up management.

Sid Sankaran, the chief risk officer, will become CFO after AIG files its annual report with regulators early next year, the New York-based insurer said in a statement Thursday. Also leaving is John Doyle, head of commercial insurance, which is one of AIG's most important businesses. Rob Schimek, who is CEO of the Americas and holds an M.B.A. from the University of Pennsylvania's Wharton School of Business, will replace Doyle.

Hancock, who became CEO in September of last year and reshaped leadership that month, told investors after posting a third-quarter loss in November that the company plans to dismiss about 23 percent of the top 1,400 members of senior management. He told staff in a meeting that they should not count on lifetime employment with the insurer, according to people familiar with his remarks.

"We are moving forward with a continued sense of urgency," Hancock said in the statement. "I have streamlined my senior leadership structure in a manner that will accelerate our decision-making and ensure that we have strong end-to-end accountability."

Herzog had been CFO since late 2008, helping the insurer recover from its bailout earlier that year. He was one of AIG's top-paid employees and had focused recently on redeeming debt that was issued when interest rates were higher. Herzog was named in October by the U.S. Treasury Department to the Federal Advisory Committee on Insurance, joining other industry leaders including New York Life Insurance Co. CEO Ted Mathas.

Sankaran joined the company in 2010 from consulting firm Oliver Wyman, a unit of insurance broker Marsh & McLennan Cos., as AIG sought to avoid a repeat of the oversights that led to billions of dollars of losses on derivative contracts and the U.S. rescue. Hancock was also brought on that year in a risk-management role.

"We are very surprised by Mr. Herzog's departure," analysts led by John Nadel at Piper Jaffray Cos. said in a note. "We think Mr. Herzog is likely to land a new role within the industry very quickly. On the other hand, we are less surprised by the departure of Mr. Doyle given the recent lack of any significant improvement in commercial results."

Schimek joined AIG in 2005 after spending almost two decades at Deloitte L.L.P., and has worked in various jobs at the insurer since. He will be responsible for turning around commercial property-casualty results after AIG said underwriting income from operations fell to $65 million in the first nine months of this year from $123 million a year earlier.