American International Group Inc (NYSE:AIG) revealed the much-awaited restructuring proposal in response to the billionaire and activist investor, Carl Icahn’s, plan to split the company into three. The plan involves the return of capital to its shareholders, and divestitures while GOE reductions and commercial P&C underwriting remain the focus areas for operating enhancements. The insurer also pushes for a modular operating model and legacy portfolio in its organizational changes. The company faced increasing pressure after MetLife Inc (NYSE:MET) announced its plan to split its retail operations in the United States.
Not For Break-Up
American International Group Inc (NYSE:AIG) made it clear that it is not breaking up the company. The insurer said that a near-term break-up would deviate itself from increasing the shareholder value. The company cited that less capital would become available for distribution due to the absence of gains from diversification. If break-up was initiated, the insurance firm fears loss of value from DTA while SIFI designation does not necessarily mean increased compliance costs.
The company said that it would divest 19.9% in United Guarantee through IPO in the current year. That is a first step towards making it as a separate firm, and, at the same time, protects the deferred tax assets value. The insurer indicated its willingness consider the separation of even bigger modular business divisions in the Commercial and Consumer divisions. However, that would be subject to credit risk profile, as well as, the operating results.
Return Of Capital
American International Group Inc (NYSE:AIG) has also pledged to return a minimum of $25 billion to its shareholders by way of dividend and share buyback program. The insurance firm also pledged to slash its general operating expenses or GOE by $1.6 billion while improving its commercial P&C accident loss ratio by six points. The company has not disclosed any time frame to achieve the proposals.
American International Group Inc (NYSE:AIG) also disclosed its intention to divest AIG Advisor Group for undisclosed terms of agreement. Lightyear Capital LLC-affiliated investment funds and PSP Investments were the buyer, and the transaction would close in the June quarter. Its CEO, Peter Hancock, said that the company would continue to undertake the business review and initiate actions to make it a more efficient and less complex firm.