American International Group Inc. has unveiled a planned overhaul of the organization that includes the sale of its mortgage insurance business.
The New York-based company
announced Tuesday that it was taking steps to become a “leaner, more profitable and focused insurer.”
Actions being taken to execute the strategy are expected to enable AIG to return $25 billion in capital to shareholders over the next two years.
Within two years, AIG expects to reduce expenses by $1.6 billion.
“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,” AIG President and Chief Executive Officer Peter Hancock said in the statement. “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 interests.”
One of the actions is the divestiture of United Guaranty Corp.
AIG said it plans to execute an initial public offering for United Guaranty for up to a 19.9 percent stake.
The offering would be subject to approval by regulators and government-sponsored enterprises Fannie Mae and Freddie Mac.
According to the announcement, the IPO — planned for mid-2016 — would be “a first step towards a full separation.”
In 2014, AIG previously reported that $42 billion in first-lien insurance was written.
Full-year 2015 mortgage insurance business will be revealed on Feb. 11 in AIG’s fourth-quarter 2015 earnings report.
With the actions, AIG is responding to pressure from activist investor Carl Icahn.
“After careful consideration, AIG believes that a full breakup in the near term would detract from, not enhance, shareholder value,” AIG Chairman Douglas M. Steenland said in the announcement. “A lack of diversification benefits would reduce capital available for distribution, and there would be a loss of tax benefits. Being a non-bank [systemically important financial institution] is not currently a binding constraint on return of capital.”
