Icahn Urges AIG To Split Into Three

(RTTNews) - Activist investor Carl Icahn said that American International Group Inc. (AIG) should immediately pursue tax free separations of both its life and mortgage insurance subsidiaries to create three independent public companies. Each would be small enough to mitigate and avert the Systemically Important Financial Institution or "SIFI" designation. AIG should embark on a much needed cost control program to close the gap with peers.

In a letter to AIG Chief Executive Officer Peter Hancock, Icahn said that AIG continues to severely underperform its peers and is now facing an increasingly onerous regulatory burden which will only further erode its competitive position.

Despite definitive action on the part of Congress and regulators to encourage this company to become smaller and simpler by splitting up, AIG has shown no sign of urgency and have chosen a "wait and see…for years" strategy void of decisive leadership. As a result AIG consistently trades at a substantial discount to book value. It is a "no-brainer" that the simple act of splitting this company up will greatly enhance shareholder value, Icahn said.

Icahn said, "We believe there is no more need for procrastination, the time to act is now. I have already heard from several large shareholders who are frustrated with the lack of clear progress and are supportive of an AIG break up. I cannot fathom how you could ignore repeated requests from shareholders to execute a plan that would release billions of dollars of capital, free the company from onerous excess regulation, and leave shareholders owning stock in three separate, market leading insurance franchises."

Despite years of dismantling and selling non-core assets, AIG is still too large. The combination of life insurance and p&c insurance into a single entity offers no net benefit to shareholders, a fact that has driven other major multiline insurers to aggressively focus on a single line of business. Separate monoline companies will be more focused, more efficient, generate better returns and, as a result, command significantly higher market valuations, Icahn said.

In a response to the letter, Peter Hancock said that AIG has taken important and significant steps to reposition the company by both simplifying and de-risking the company, and realizing attractive valuations from non-core asset sales. AIG maintains an open dialogue with all shareholders and welcomes their feedback and ideas.