Billionaire Investor Carl Icahn: AIG is 'Too Big to Succeed'

Carl Icahn has published a letter on his website addressed to AIG CEO Peter Hancock that urges him to split up the global insurer into three independent public companies.

Icahn says he now owns a “large stake” in the company, though has not yet disclosed how large. A long-time activist investor, Icahn writes that AIG is “too big to succeed” and has been performing poorly compared to its competitors. He says it currently has an industry low return on investment. Instead of taking any action, he says that the company has taken a “wait and see…for years” strategy.

He says that AIG has previously been advised by others to split up the company. Icahn cites another hedge fund billionaire, John Paulson, president of investment and management company Paulson & Co., as saying:

AIG is frankly overdue in following in the footsteps of all other major multi-lines in breaking up Life [insurance] and P&C [property and casualty insurance] into separate companies. By separating into three independent companies, reducing unnecessary corporate overhead, operating at average industry returns, and buying back stock, AIG can trade at over $100 per share – 66% above its current $60 price.

According to Icahn, by breaking AIG’s mortgage and life insurance off from its core property and casualty insurance business, the company could release billions in capital, avoid excessive regulations, and “leave shareholders owning stock in three separate, market leading insurance franchises.”

In a statement, Hancock confirmed receiving the letter. AIG’s statement read, in part: “AIG maintains an open dialogue with all our shareholders and welcomes their feedback and ideas. We have taken important and significant steps to reposition AIG by both simplifying and de-risking the company, and realizing attractive valuations from non-core asset sales. We remain on course and are determined to continue and accelerate these efforts.” The company’s third-quarter earnings will be released on Nov. 2.

Icahn has made similar public proposals to other companies in which he’s invested, including Apple and eBay. Icahn notified the public of his letter to AIG with a tweet.