Icahn says the split would let AIG to “shrink below the threshold for systemically important financial institutions” (SIFI) and avoid SIFI-related regulatory restrictions.
The American International Group ("AIG") Decision
Bar none, there has been no more innovative and successful organization in the property and casualty insurance realm then AIG. The following headline today:
AIG Chairman Defends Keeping Both Life and P/C Insurance Units - Insurancejournal.com
...amazes me to even be in consideration. AIG did not just distribute the most product, they created the most. Their entities provide the largest amount of "excess and surplus" (aka non-admitted) capacity then any other insurer times three in the country.Not a life guy, so admittedly come from a position of not understanding how anyone with a right mind would ever consider selling the crown jewel of AIG - their property and casualty insurance portfolio. It seems "investor activists" such as Carl Icahn have a different take:
"Icahn Renews Attack on AIG CEO Hancock; Insists ‘Drastic Shift’ Needed"
http://www.insurancejournal.com/news/national/2016/01/19/395397.htm
Activist investor Carl Icahn has again called for American International Group (AIG) to be divided into three separate companies and expressed doubt that AIG CEO Peter Hancock’s planned strategy presentation next week will satisfy his demand.He said that if Hancock “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” then what “little credibility management now has will be lost.”
“[I]t is abundantly clear to me there is only one sensible path for AIG to follow: become a smaller, simpler company with a path to de-SIFI,” he said in a letter on his website. - Carl IcahnSo the greatest insurer in the past century has to disband its units because the federal government has given it the equivalent of the "franchise tag" in the NFL. Really man?Let's look at their numbers...AIG Consolidated Operating Financial Highlights ($ in Millions, Except per Share Amounts) 1Q15 1Q16 Inc. / (Dec.)Operating revenues $14,590 $12,737 (13%)Pre-tax operating income (loss):Commercial Insurance: Property Casualty 1,170 720 (38%)Mortgage Guaranty 145 163 12%Institutional Markets 147 6 (96%)Total Commercial Insurance 1,462 889 (39%) "...the p and c side"Consumer Insurance: Retirement 800 461 (42%)Life 171 105 (39%) Personal Insurance (26)222 N/M Total Consumer Insurance 945 788 (17%) "...the life side"Total Insurance Operations 2,407 1,677 (30%)and today's article out of the journal.,,,Breaking up AIG is a huge mistake as well as continuing to drill the current CEO. How does one run a company when he is is constantly under seige... They have already lost many top execs recently such as John Doyle (Marsh) and Russell Johnston (QBE) whom I amagine had to be frustrated with more time spent defending the company versus advancing it. These two Industry stalwarts, with the help of course of their colleagues, allowed AIG the second chance in this writer's opinion and to see them leave and press like this is saddening. Let's hope Icahn gets bought out...-PRH
By Sonali Basak and Emma Orr( | May 12, 2016
American International Group Inc., which is shrinking under pressure from activist investors, is committed to retaining operations in both life insurance and property/casualty coverage, Chairman Doug Steenland said.
“We remain of the view that that is the right long-term position for AIG,” Steenland said Wednesday at the company’s annual meeting in New York. “Although, the specific components of what’s in each of those businesses may change.”Billionaire Carl Icahn said last year that AIG is too big and should split into separate companies. Chief Executive Officer Peter Hancock instead is selling smaller units as part of a plan to free up $25 billion in capital to be returned to shareholders over two years. That has helped ease tension with activists including John Paulson, who was elected to the insurer’s board Wednesday along with a representative of Icahn’s firm.Hancock reached a deal in January to sell a broker-dealer operation, and AIG’s mortgage insurance unit filed in March for an initial public offering. The CEO has also been cutting jobs.“This is hard and sometimes painful work,” he said at the meeting. “We have much left to accomplish.”AIG advanced 14 cents to $56.49 at 12:15 p.m. in New York. That compares with the closing price of $60.92 on Oct. 27, the day before Icahn disclosed a stake in the insurer and publicly called on Hancock to break up the company.
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