AIG To Restructure, Sell Broker/Dealer Network
January 26, 2016 by Paul Davidson
AIG announced a major shakeup Tuesday that includes selling its network of independent financial advisors and reorganizing into nine business units, but the insurance and financial giant rejected investor Carl Icahn’s proposal for a breakup.
“After careful consideration, AIG believes that a full breakup in the near-term would detract from, not enhance, shareholder value,” AIG Chairman Douglas Steenland said. “A lack of diversification benefits would reduce capital available for distribution, and there would be a loss of tax benefits.”
Criticizing the company as slow-moving and difficult to manage, Icahn last year called for splitting up the company into three separate insurance firms handling life, property and casualty, and mortgages.
Instead, AIG on Tuesday said it has agreed to sell AIG Advisor Group — one of the nation’s largest networks of independent broker-dealers – to Lightyear Capital for undisclosed terms. The unit has more than 5,200 independent advisors and more than 800 employees.
The company also said it will:
► Restructure into nine business units that include individual retirement, and health and disability in the consumer segment, and liability and property in commercial. AIG said the move “will decentralize decision-making, provide more accountability to business leaders, and allow for migration to a more variable cost structure.” The company said it will have the option of taking the divisions public or selling them.
In a note to clients, Citigroup analyst Todd Bault said the reorganization is “as close to a breakup as possible without breaking up.”
►Return at least $25 billion of capital to shareholders over the next two years through dividends and stock buybacks.
►Cut $1.6 billion in costs in two years, or 14% of its gross operating expenses, by streamlining operations and other moves.
“With these actions, AIG has taken another major step in simplifying our organization to be a leaner, more profitable insurer, while continuing to return capital to shareholders and improve shareholder returns,” CEO Peter Hancock said. “The creation of more nimble, standalone business units that can grow within AIG or be spun out or sold allows us to do what is in our shareholders’ best interest.”
Bault said the plan is “much more aggressive than previous presentations.” “These may be difficult goals to achieve, but if achieved it would represent significant improvement over past efforts,” he said.
