Lloyd's Ex-CEO John Neal Loses $17 Million AIG Position Over Workplace Relationship Investigation

Neal, 60, began his professional journey in 1986 as a trainee commercial motor underwriter at Lloyd's.

The insurance industry was taken by surprise last week when American International Group Inc. announced its separation from incoming President John Neal, leaving observers questioning how the veteran executive lost a $17 million (approximately Rs 1,50,68,80,000) position before even starting.

This week brought clarity to the situation.

Lloyd's of London, the massive insurance marketplace where Neal served as chief executive officer until earlier this year, revealed Wednesday that it had been investigating his conduct since October. The Wall Street Journal reported that AIG withdrew its offer after learning about the probe, which focused on an alleged relationship Neal had with a Lloyd's employee.

This appeared to be a pattern in Neal's career. It was already public knowledge that the board of Australian insurer QBE Insurance Group Ltd., where Neal previously served as CEO, reduced his 2016 bonus by more than A$550,000 ($354,000) after discovering he hadn't disclosed a relationship with a subordinate. Bloomberg had previously reported that the woman in question had replaced Neal's former assistant - whom he had married.

AIG declined to comment, and Neal did not respond to messages seeking comment.

The rapid reversal highlights the complex nature of workplace relationships. Recent incidents have resulted in CEO departures from companies including Nestle SA, Kohl's Corp. and Astronomer, where Andy Byron lost his position in July after being captured on a stadium "kiss cam" with the company's chief people officer at a Coldplay concert.

This case stands as a particularly stark example of how even the world's largest corporations can be caught unprepared in high-profile hiring decisions - even for candidates who have been headhunted, vetted, and promised substantial compensation packages.

"Workplace culture has become one of the biggest risk factors in the financial sector," Ian Hargreaves, partner at commercial disputes specialist Quillon Law, told Bloomberg.

"Many firms have rewritten rules on workplace relationships, and some have moved close to outright bans," Hargreaves said. "With that level of scrutiny, the idea that this latest issue slipped through the gaps is surprising."

Neal would have received a potential $17.2 million pay package at AIG, including approximately $5 million in salary and bonuses for his first year, a target annual equity award of $5 million, a Day 1 restricted-stock grant of $4.5 million with a three-year vesting period, and a $2.7 million cash bonus.

Neal's insurance career started in 1986 as a trainee at Lloyd's, according to his LinkedIn post upon leaving the firm. He later ran Ensign, Lloyd's specialist commercial motor underwriter, which was subsequently acquired by QBE. After about eight years with the Australian insurer, Neal's emphasis on profitability helped elevate him to CEO.

During Neal's tenure as CEO, QBE underperformed its peers in Australian markets. QBE shares delivered investors an annualized total return of about 1% during his leadership, compared to approximately 21% from competitors, according to Bloomberg data compiled at the time of Neal's departure.

Before leaving QBE, Neal admitted to failing to disclose a relationship with his personal assistant, resulting in the board reducing his bonus.

In 2018, Neal was appointed CEO of Lloyd's of London as the company struggled with profitability post-Brexit. While the insurance exchange returned to profitability under Neal within a year, the firm was also shaken by a 2019 Bloomberg Businessweek article exposing widespread sexual harassment at Lloyd's.

The Businessweek report prompted Neal to implement systematic changes to combat sexual harassment, including lifetime bans, a whistleblower hotline, and an independent survey of sexual-harassment claims.

"This is not the Lloyd's that I want to be part of," Neal stated in a Bloomberg interview in March 2019. "We have got to ensure that everybody, whether it's a woman or a man, should feel safe at any time of day doing anything that's associated with the Lloyd's market. I'm determined that will be the case."

Neal's departure from Lloyd's was announced in January 2024. He initially agreed to lead insurance broker Aon Plc's global reinsurance unit before AIG offered him a more attractive role in July, announcing he would become president and lead its property and casualty business.

However, as Neal prepared for one of the industry's top positions, rumors regarding his relationship with a subordinate reached senior levels at his former employer. Lloyd's Chairman Charles Roxburgh "became aware of market speculation concerning possible historic breaches of policy" and initiated an independent fact-finding review in October, according to the firm's Wednesday statement.

Inga Beale, Neal's predecessor at Lloyd's who served as CEO from 2014 to 2018, had launched diversity and inclusion initiatives but faced resistance among employees.

"My initial reaction is disappointment," Beale said upon learning of the investigation. "I thought we had made a lot of progress and these sorts of things were not going to be happening in this day and age."

On Friday, AIG announced reaching a "mutual agreement" with Neal, confirming he would no longer join the insurer as president. He had been scheduled to start on December 1.

James Berkeley, a London-based adviser to insurance executives, questioned AIG's vetting process, noting that Neal had been set to assume many duties previously handled by David McElroy.

McElroy, formerly AIG's chairman of general insurance, was charged by Vermont state prosecutors last year with three counts of sexual assault and one count of lewd and lascivious conduct against a woman who attended an AIG conference in Stowe. AIG announced last April that McElroy, who is distantly related to AIG Chief Executive Officer Peter Zaffino, would "accelerate his retirement date for personal reasons."

"The evidence that has developed since the case was filed more than a year ago continues to show that David McElroy has been wrongfully charged and is innocent," David Kirby, McElroy's attorney, stated in an email. "He looks forward to his day in court; until then, the charges should be seen for what they are - mere allegations that are vehemently denied."

Given this context, Berkeley noted that AIG shareholders would have expected the board "to have conducted effective due diligence, and weighed up the risk of a CEO with past weaknesses." He added, "Perhaps they were so convinced of John Neal's hugely scarce, and compelling value, as president that they were willing to roll the dice."

Nevertheless, Berkeley wasn't shocked by AIG's sudden reversal. Considering Neal's history, he remarked, "my only surprise is that we are surprised."