AIG to spin off mortgage insurance unit in sweeping overhaul

Further job cuts are planned this year.

Criticizing the company as slow-moving and hard to manage, Icahn past year called for splitting up the company into three separate insurance firms handling life, property casualty and mortgages. AIG is one of four nonbank financial firms to be labeled systemically important. In November, Icahn said if AIG continued to disregard shareholder demands, he would use his influence to try to push Hancock out.

The breadth of the reorganization and comments surprised some analysts who had anticipated moderate cost-cutting moves and small divestitures. AIG said the move “will decentralized decision-making, provide more accountability to business leaders, and allow for migration to a more variable cost structure”. The company has committed itself to returning $25 billion to shareholders over the next two years and taking other steps to enhance shareholder value. Paulson & Co. bought its AIG stake previous year, according to regulatory filings.

AIG climbed 1 percent to $55.91 at 4pm in NY.

“There are no sacred cows and we mean that”, he said in a presentation to investors and analysts.

AIG announced several other steps Tuesday that it said would lead to a “leaner, more profitable and focused” company.

American International Groups plan to spin off a portion of its mortgage insurance unit is “almost pointless” given the challenges that chief executive officer Peter Hancock faces to fix the much larger property-casualty business, an analyst at Keefe, Bruyette & Woods said. He also announced expense reductions of $1.6 billion within two years.

AIG plans to return $25 billion in capital to shareholders from a combination of improved operating performance, divestitures, reinsurance transactions, a shift in asset allocation, a modest increase in leverage and the release of capital over time from low-earning legacy assets. Still, operating ROE trails rivals at AIG and was 7.1 percent in the nine months through September. The insurer also is reorganising into “modular” business segments to create flexibility to sell or take public additional units if they underperform or draw attractive bids. During the financial crisis, AIG posted huge quarterly losses, and tax law allows companies to use those losses to offset future gains.

Hancock previously said that the insurer benefits from its breadth of product offerings and global reach, and that a separation could squander at least a third of AIG’s tax assets, which were valued at about $15 billion in the third quarter of 2015.

The insurer’s stock got a boost when Carl Icahn started agitating for change at the end of October, but the gains evaporated. “I don’t see the possibility of a breakup”.