The board of American International Group (AIG) has published the insurer’s game plan to turn the company around in the face of increasing pressure recently.
On January 26 AIG’s board announced a series of strategic actions, organisational changes, and operating reforms to create a leaner, focused and more profitable insurer.
The plan includes the return of at least $25bn of capital to shareholders over the next two years.
Activist investor Carl Icahn has written public letters calling AIG “too big to succeed”, and calling the group to be broken up to avoid its status as a Systemically important financial institution (Sifi).
Additional pressure was heaped on AIG when US life insurer Metlife – also a designated Sifi – outlined its own plans to split up, published earlier this month.
MetLife’s latest plan to shake off Sifi status is to separate a substantial portion of its US retail segment, while looking at structural alternatives, such as share sell offs, and spinning off other bits of the group.
AIG’s new plan includes a 19.9% share sell off of United Guaranty Corporation in mid-2016, as a first step towards spinning off the unit entirely.
The insurer also said it plans the sale of its AIG Advisor Group to Lightyear Capital and PSP Investments.
The board also approved a number of housecleaning changes, including creating nine “modular” business units, each with its own specific financial metrics, and a new “legacy” portfolio to hold non-strategic assets.
Expense reductions of $1.6 bn are also planned over the next two years, plus a target of improving its accident year loss ratio across commercial property and casualty by six percentage points.
The group is also aiming for a 9% target return on equity to shareholders by 2017, reflecting 10.3% to 10.7% in its operating portfolio.
Metlife has previously brought a legal challenge as part of its plan to fight its Sifi status.