The commercial insurer, under pressure from shareholders, announced a series of measuers aimed at boosting profit and returning money to shareholders. Fred Katayama reports.
AIG’s massive overhaul
A sweeping overhaul at AIG. The U.S.’ largest commercial insurer says it’s embarking on a series of moves that will make it leaner and boost profit. It will sell its broker-dealer network, AIG Advisor Group. It’ll spin off its mortgage insurance business, United Guaranty and take that public. And it plans to cut $1.6 billion in costs and give back at least $25 billion to shareholders over the next two years through buybacks and dividends.
The announcement comes after months of pressure from activist investors. Carl Icahn insisted that the company split itself into three parts so it can become small enough to avoid the Fed’s capital requirements and heightened oversight. AIG CEO Peter Hancock refused, saying today, “The creation of more nimble, standalone business units that can grow within AIG or be spun out or sold allows us to do what is in our shareholders’ best interests.”
But Sanford C. Bernstein senior analyst Josh Stirling called AIG’s moves a “mixed bag” for investors, saying while its strategy has recently improved, “Its efforts appear to stop short of being radical or transformational.”
Investors applauded the measures, sending shares higher in early trading.
Those shares have catapulted higher since the government bailed out the insurer in 2008. The Treasury and the Fed made nearly $23 billion after selling its stakes in the company.