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Icahn: AIG should split into 3 firms to avoid 'high-risk' tag

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(Reuters) — Acitivist investor Carl Icahn said on Wednesday American International Group Inc. should split its life and mortgage insurance units into three public companies to avert the U.S. government's “too-big-to-fail” tag.

Mr. Icahn, who disclosed that he owns a “large stake” in AIG, also said in an open letter to the company's CEO that it should begin a “much needed” cost control program to better compete with peers.

AIG shares rose as much as 4% to $63.44 in early trading.

Mr. Icahn said each company would be small enough to avert the systemically important financial institution (SIFI) designation, which indicates regulators are concerned that a company's failure, should it ever occur, might imperil the financial system.

AIG has been subject to new supervision by the Federal Reserve after it was designated as a “systemically important” firm by a top U.S. regulatory panel in 2013.

AIG, the largest commercial insurer in the United States and Canada, is expected to report third-quarter earnings on Nov. 2.

“We have taken important and significant steps to reposition AIG by both simplifying and de-risking the company, and realizing attractive valuations from non-core asset sales,” AIG Chief Executive Peter Hancock said in a separate statement.