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AIG, shareholder Icahn squabble over insurer's future

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American International Group Inc. is back in the spotlight, trading rhetoric with Carl Icahn in a battle that is drawing mixed reaction from viewers.

Mr. Icahn on Monday said in a statement that he is one of AIG's largest shareholders with over 42 million shares and that he intends to launch a consent solicitation to shareholders that may include a proposal to add a new director who could eventually succeed Peter Hancock as CEO.

The activist shareholder has been pressing for dramatic changes at the insurer to improve performance, including a possible breakup of the company.

AIG recently said it would cut 23% of its 1,400 senior management employees in a restructuring after swinging to a third-quarter loss of $231 million from a profit of $2.2 billion in the year-ago period.

AIG responded with its own statement reiterating its position that a breakup of the company is not in its best interests and that it would continue dialogue with shareholders including Mr. Icahn

Those in the audience seemed underwhelmed and bemused.

“Really nothing new, other than a fairly vague threat to try to nominate a board member. If he actually goes through with filing for that, then it's news,” said one observer on condition of anonymity.

In his statement, Mr. Icahn also said that he had sent a public letter to Mr. Hancock on Oct. 28 saying that AIG was “too big to succeed.”

“It's interesting to us that even after presumably detailed conversations with AIG CEO Peter Hancock, Mr. Icahn still isn't convinced that a 'de-SIFI-ed' AIG would have no material capital or expense benefits,” Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. in Baltimore, said in a research note.

As a systemically important financial institution, or SIFI, AIG is subject to rigorous capital and regulatory standards, which, if the company were broken up, would no longer apply, saving the company time and money, argues Mr Icahn.

“Our earnings-based valuation actually anticipates little upside from breaking up AIG, unless significantly lower capital requirements can fund much-higher-than-expected share repurchases,” said Mr. Shields in his note.

He did, however, seem to share Mr. Icahn's concerns about AIG's performance.

“Mr. Icahn noted that Mr. Hancock 'failed to lay out any alternative strategic plan with the potential to unlock value for shareholders.' That seems consistent with our skeptical take on AIG's current cost-cutting plan,” said Mr. Shields in the note.