Three-way breakup would be bad for shareholders, AIG says

Following Carl Icahn’s rejection of AIG’s plan to streamline, the company has defended its position, saying Icahn’s proposal would negatively impact investors

Insurance News

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American International Group investor Carl Icahn’s continued attempts to break the conglomerate into three companies would impose additional capital constraints and negatively impact oher shareholders, the carrier said this week.

The statement comes days after its presentation of future efforts to streamline the company failed to impress Icahn, who said he would persevere in his campaign to split up the company and possibly seek a new slate of directors for AIG.

AIG Chief Executive Peter Hancock continued stress that being labeled a systemically important financial institution (SIFI) – which Icahn hopes to dodge by breaking up the company – is not as onerous as it seems. And, by being in many businesses at once, AIG is able to deliver maximum value to shareholders and a split of those businesses would “likely impact AIG’s ability to return capital to shareholders.”

Part of Hancock’s plan for the insurer is to buy back at least $25 billion in stock and dividends.

The chief executive added that it made more sense to wait until the rules for non-bak SIFIs were formalized by regulators before taking drastic action to avoid them. The outcome of a pending lawsuit brought by MetLife, which is challenging its own non-bank SIFI designation, “may provide further clarity” on the situation.

Icahn, however, has said he does not intend to wait. He has rejected the plan in all its particulars and hopes to propose a new director who would agree in advance to succeed Hancock as chief executive if agreed on by the board.

He hopes that with support of a new slate of directors and a potentially new CEO, he will have the support needed to split AIG into three companies: property/casualty insurance, life insurance and mortgage insurance.

Analysts are divided on both plans, with an Oliver Wyman report supporting the notion of staying in many businesses at once and Sanford C. Bernstein analyst Josh Stirling saying the plan does nothing to “tame [AIG’s] underwriting and expense problems.”
 

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