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Activist investor renews call for AIG breakup in open letter

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Investor Carl Icahn on Tuesday repeated his call for American International Group Inc. to downsize in a letter to the insurer's board that blasts the company's management.

“I believe management's credibility with shareholders is all but gone. I suspect, after two months of waiting, management will release a 'strategic update' on January 26th that fails to present a drastic strategic shift and instead is limited to only incremental changes such as small-scale asset sales and incremental cost cutting,” said Mr. Icahn in an open letter to the board. “If this occurs then the little credibility management now has will be lost.”

Mr. Icahn wants AIG to splitinto three separate companies — life, mortgage and property/casualty — which he has said he believes will both enhance shareholder value and remove AIG from the federal government's list of systemically important financial institutions subject to greater oversight, capital and reporting requirements by the Federal Reserve.

AIG is one of the three insurers — the others being MetLife Inc. and Prudential Insurance Co. — designed as SIFIs. MetLife, which has been fighting the designation in court, recently announced plans to divest its U.S. retail operations in order to emerge from SIFI status, a development Mr. Icahn noted in his open letter.

In the letter, Mr. Icahn said that AIG's management “has been either purposely misleading in their public disclosures or is negligently uninformed regarding the feasibility of a de-conglomeration plan.”

Among other things, Mr. Icahn called on AIG to “commit to streamline operations and focus on transforming the company into a competitive, pure play P&C insurer by committing to sell, spin, or otherwise separate non-core operations to de-conglomerate and apply to de-SIFI,” and to “commit to fixing the P&C franchise so that it can generate competitive, double digit return on equity (ROE) through improved underwriting and cost reductions, even if it means bringing in outside talent.”

AIG President and CEO Peter Hancock is scheduled to discuss the company's strategy in a Jan. 26 webcast.

“AIG continues to take steps to narrow its focus, improve its financial performance, and return capital to shareholders,” said AIG in a statement issued Tuesday in response to Mr. Icahn. “AIG maintains an active dialogue with shareholders, including Carl Icahn. As previously announced, on January 26, AIG will provide an update on its strategy and its proactive plan to drive shareholder value.”