Newspaper article International New York Times

A.I.G. Plans Restructuring in Bid to Appease Activists ; Insurance Giant Rejects Demand from Icahn That It Break Itself into 3 Firms

Newspaper article International New York Times

A.I.G. Plans Restructuring in Bid to Appease Activists ; Insurance Giant Rejects Demand from Icahn That It Break Itself into 3 Firms

Article excerpt

The insurance giant brushed aside Carl Icahn's push for a breakup, saying it would sell or spin off some businesses and create nine operating units.

The insurance giant American International Group has announced a series of changes designed to streamline its sprawling operations, but stopped short of acceding to demands that it break up.

The company said Tuesday that it would spin off 19.9 percent of United Guaranty, its mortgage guaranty business, as well as sell its financial advisory business and create nine distinct operating units in its commercial and consumer divisions. The moves are intended to shore up financial performance and give A.I.G. the flexibility to separate or sell businesses in the future.

While the company is not ruling out more radical changes, "now is not the time to be shortsighted and simply react to the demands of those who challenge us," A.I.G.'s president and chief executive, Peter Hancock, said in a memorandum to employees on Tuesday.

"The creation of more nimble stand-alone business units that can grow within A.I.G. or be spun out or sold allows us to do what is in our shareholders' best interests," Mr. Hancock said in a statement announcing the changes.

The company will start an initial public offering for United Guaranty by midyear with the eventual goal of full separation. It is selling A.I.G. Advisory Group, with 5,200 independent advisers and 800 employees, for an undisclosed amount to Lightyear Capital and the Canadian pension investment manager PSP Investments.

In addition, it is moving some underperforming older assets into a new business to be run by Charlie Shamieh, who leads the life, health, and disability insurance business.

A.I.G. also announced a $25 billion stock buyback and dividend plan over two years and the addition of $3.6 billion before taxes to its loss reserves.

The plan may not be enough to satisfy the demands of impatient shareholders.

The announcement comes three months after the activist investor Carl C. Icahn made public his campaign to split A.I.G. into three separate companies and shake off the regulatory designation that it is too big to fail, which subjects A.I.G. to greater oversight.

Mr. Icahn has since publicized two more letters to A.I.G. and says large shareholders, including the hedge fund manager John Paulson, agree with splitting the company into three.

More than seven years ago, the sprawling company had to be rescued by the federal government with billions of dollars of crisis- era bailout funds. Since then the insurer has resisted calls to break itself apart, though it has tried to slim down, including through the sale of Asian life insurance units and its aircraft leasing business.

Investors, including Mr. Icahn and Mr. Paulson, complained that A.I.G.'s management was taking too long and needed to make more radical changes. …

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