Analyst can't see case for reported AIG mortgage spinoff

AIG/ BLOOMBERG

A report Friday that American International Group Inc. intends to spin off its mortgage insurance unit drew a tepid response from an analyst Monday.

“This move strikes us as close to useless, for three reasons,” a research note from New York-based Keefe, Bruyette & Woods said Monday. The note was in response to Friday's Wall Street Journal and Reuters reports that the insurer was contemplating such a move.

The analyst — Baltimore-based Meyer Shields — laid out the firm's reasoning.

“It seems very unlikely to us that divesting a minority of United Guaranty would free even that unit from any SIFI-related capital and/or expense requirements,” the note said.

Activist investors including Carl Icahn have called for AIG to break itself up in part to free the company from scrutiny as a Systemically Important Financial Institution.

The Keefe, Bruyette note also said that “mortgage insurer valuations have compressed significantly over the past two years,” making the timing of such a move “very far from ideal.”

The analyst also argued against selling “better-performing businesses” to solve AIG's fundamental problem of “very poor (property/casualty) profitability.”

AIG said it will announce its own plans for the company in a statement scheduled for Tuesday.