AIG CEO Rebuffs Idea of Breaking Up Company -- Update
November 03 2015 - 9:41AM
Dow Jones News
By Leslie Scism and Erik Holm
The head of American International Group Inc. said management
and the board have "carefully reviewed" the idea of breaking up the
insurer on many occasions and concluded that such a move "did not
make financial sense."
The comments from AIG Chief Peter Hancock, made in a conference
call with analysts and investors Tuesday, were his first since
activist investor Carl Icahn last week sent a letter urging the
company to split into three pieces. Mr. Icahn has argued that
splitting apart would reduce the company's regulatory burden.
On Tuesday, Mr. Hancock said that assumption wasn't true.
The "assumed outcome" under Mr. Icahn's proposal is the ability
to return more capital to shareholders, but ratings firms like the
stability and diversification of a combined company, Mr. Hancock
said. Due to ratings-agency concerns, smaller companies would
likely return "less capital, not more," he said.
Mr. Hancock said AIG sees a "tremendous benefit" in having a
combined life and property-casualty operation, and that a split
would be a "distraction" from the company's cost-cutting
initiatives.
He said AIG's management would meet with Mr. Icahn to share its
conclusions.
Mr. Icahn and hedge-fund billionaire John Paulson have argued
that by dividing AIG into smaller pieces, AIG could escape its
federal designation as a systemically important financial
institution. The label indicates the government believes the
companies could pose risks to the broader economy during a crisis.
The designation brings with it heightened scrutiny and requirements
to hold robust capital buffers against unexpected losses.
Asked Tuesday whether the company's SIFI designation is causing
the firm to hold more capital, Mr. Hancock said the answer is
"definitively no."
"We anticipated this [SIFI] designation before we exited the
government's cradle," he says, referencing the government bailout
of AIG during the financial crisis. The company already did
"massive" divestitures, he said. Unlike other SIFIs that are
de-levering now, "we got that done by the end of 2011."
AIG shares are down 3% premarket to $61.80.
Write to Leslie Scism at leslie.scism@wsj.com and Erik Holm at
erik.holm@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 03, 2015 09:26 ET (14:26 GMT)
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