Leadership with American International Group has repeatedly rejected calls from investors including billionaire Carl Icahn to sell portions of its business as the company’s revenues and returns have fallen However, a recent Bloomberg report suggests the insurer is now responding to some of that pressure by looking to sell some books of insurance contracts.
According to anonymous sources, Chief Executive Officer Peter Hancock intends to update investors on his plans for simplifying the firm, which may include the sale of blocks of life insurance policies. These sources say the presentation, which will come before the reporting of fourth-quarter results, is designed to show that Hancock has a vision for improving returns that need not include splitting the company.
“There is increased pressure for
AIG to improve its performance, based on activist investor involvement,” Jay Gelb, an analyst with Barclays Plc, told Bloomberg.
Indeed, Icahn has stated his intention to take his plan to split AIG directly to its investors, and may even push for Hanock’s removal, saying it had become “abundantly clear” that Hancock is not willing to “sincerely consider” the breakup plan.
If AIG goes forward with the plan, it will join other insurers – including
Hartford Financial Services Group, XL Group,
CNA Financial Corp. and
Allstate – who have exited blocks of life or retirement contracts it sold in recent years to narrow their focus on the property/casualty market.
However, some analysts are warning that the extreme pressure from Icahn may actually backfire and harm investors. Although investors are largely behind Icahn’s cause – with shares up 6.6% – the
Wall Street Journal says it “may be overreaching.”
The report points to past failures of activist shareholder attempts o gain board access, in which the companies lost value.
“Mr. Icahn’s proposal would result in a divided board, with board members representing different constituencies,” the
Journal said. “This can erode trust and hinder effective governance…Just because Mr. Icahn likes a good brawl doesn’t mean investors will come out ahead.”
