NEW YORK (Bloomberg) — American International Group Inc., the insurer bailed out by the US government, is losing customers and employees amid Congressional vilification of the firm, the head of a competing company said.

Complaints by lawmakers about AIG's bonus payments are tarnishing the firm and driving commercial insurance customers to rivals, said Loews Corp. chief executive officer James Tisch. Loews owns 90 percent of Chicago-based business insurer CNA Financial Corp.

Tisch's comments reinforce remarks by AIG's CEO, Edward Liddy, who has said some bonus payments are needed to retain staff as the insurer seeks to sell businesses and repay the US loan. Executives at competing firms had anticipated that AIG, with financial backing by the government, would undercut rivals to retain customers as it put the businesses on the block.

"It's helped CNA, but it disappoints me as a taxpayer," Tisch said in a Bloomberg Television interview. "It should have been much more difficult for us to compete against AIG, but the reality is, I think it's become dramatically easier. And that's because Congress has made such a stink over compensation."

A profitable property-casualty division was the centrepiece of Liddy's strategy to revive AIG and woo private investors following the government's initial $85 billion bailout in September. That plan stalled amid deepening losses on subprime investments and Liddy's difficulty finding buyers for other units, and the taxpayer-funded bailout has since been revised three times and grown to a package valued at $182.5 billion.

AIG privately told the government in February that its US commercial insurance business has struggled to attract customers as employees quit to work for competitors, said a person familiar with the situation.

"The AIG name is so thoroughly wounded and disgraced that we're probably going to have to change it," Liddy told a Congressional panel this month. "If I can't turn this situation around, we run the risk that that business does atrophy."

AIG has already begun the process of rebranding several units, including the operation that sells commercial coverage in the US A portion of that unit may be offered to the public in a stock sale as part of the plan to pay back the government.

AIG's decision to pay $165 million in bonuses this month after the latest revision of its bailout triggered a public outcry, and President Barack Obama called the payments "inappropriate." Liddy has since asked employees at its money-losing Financial Products unit to return bonus money, prompting one company vice president to submit his resignation in an opinion piece published on Wednesday in the New York Times.

"They've made sure that the A team and the B team are out the revolving door at AIG, and what's going to be left is the third and fourth string," Tisch said. 'For the life of me, I don't understand how that is good for the country."

AIG and CNA compete selling coverage to businesses to protect against worker injuries, property damage and lawsuits.

"We have a leading franchise with great people committed to our clients," said Christina Pretto, an AIG spokeswoman, when told of Tisch's comments.

The Government Accountability Office, the investigative arm of Congress, said in a March 18 report that state insurance regulators, brokers and buyers of business coverage "have seen no indications that AIG's commercial property-casualty insurers are selling coverage at prices inadequate to cover the risk involved."