American International Group Inc. has agreed to nominate a representative of billionaire investor Carl Icahn, along with hedge fund manager John Paulson, to the board of directors in an apparent settlement with the activist investor who is calling for the insurer’s breakup.
The board will be expanded to 16 directors from 14, the New York-based insurer said on Thursday in a statement. Joining Paulson is Samuel Merksamer, a managing director at Icahn Capital.
AIG chief executive Peter Hancock and chairman Doug Steenland are seeking to assuage Icahn after presiding over two straight unprofitable periods, including a fourth-quarter loss of US$1.84 billion announced on Thursday, Bloomberg News reported.
Icahn faulted the insurer in October for failing to meet profitability targets, and he and Paulson pressured AIG to focus on property-casualty coverage, the report said.
Icahn has said the plan announced in January by the insurer to exit smaller assets, including the mortgage guaranty business and a broker-dealer network, is not enough of a drastic change.
“We continue to believe that smaller and simpler is better and look forward to working collaboratively with the board and management,” Icahn said in a separate statement, adding that he declined to join the panel because of his busy schedule.
AIG also is major seller of life insurance and retirement products.
Icahn said board additions should “help catalyze a turnaround in core P&C operations, a more transparent operating structure, and the ultimate shedding of the SIFI designation”, a tag given to systemically important financial institutions that are subject to heightened regulation.
Hancock has urged patience from investors while selling stakes in an aircraft lessor, a consumer finance company and some operations overseas.
He has repeatedly rebuffed Icahn’s plan to strip down to property-casualty operations, citing diversification benefits, and has said a split could squander at least a third of AIG’s more than US$15 billion in tax assets.
AIG reported a net loss of US$1.50 a share. The operating loss, which excludes some investment results, was US$1.10 a share, missing by 19 cents the average estimate of 16 analysts surveyed by Bloomberg.
Hancock also announced on Thursday that the insurer authorized the repurchase of another US$5 billion in stock and would lift its quarterly dividend 14 percent to 32 US cents a share.
AIG has declined 18 percent this year to US$50.52 in Thursday afternoon trading, compared with a drop of about 11 percent in the Standard & Poor’s 500 Index. Results were released after the close of regular trading.
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