AIG American International Group Inc

   (FROM THE WALL STREET JOURNAL 1/25/16) 
   By Leslie Scism 

American International Group Inc. plans to offer shares of its mortgage-insurance unit to the public while retaining a large majority position, according to people familiar with the matter, heeding many investors' calls for more asset dispositions but not following activists' game plan for an immediate breakup of the insurance conglomerate.

Separately, AIG is finalizing a deal to sell its network of broker-dealers, people familiar with the matter said.

The transactions are part of a broader effort to slim down that began when the insurernearly collapsed into bankruptcy proceedings in 2008 and received one of the biggest bailouts of the financial crisis, since fully repaid.

Recently, AIG has come under increasing pressure to take more drastic steps to improve results. Activist Carl Icahn and fellow billionaire investor John Paulson have called for the company to soon break into three parts, as part of a plan to get out from under federal regulation as a "systemically important financial institution."

AIG Chief Executive Peter Hancock has said that while heunderstands many investors' desire for urgent action to boost the company's overall financial results, an immediate breakup isn't in shareholders' best interests.

Analysts expect the mortgage-insurance unit, one of AIG'smost profitable businesses,to probably be valued at or above $3.5 billion. The broker-dealer sale would total hundreds of millions of dollars, analysts say.AIG has a market value of about $70 billion.

While AIG has been aggressively buying back its shares with the cash it is generating from operations and asset sales, its profitability lags behind big rivals like Travelers Cos. and Chubb Ltd., the newly merged ACE Ltd. and Chubb Corp.

Mr. Hancock is set to update investors on the company's strategy in a session Tuesday morning, and the two transactions are expected to be discussed. They are likely to be part of a menu of items -- including potentially steeper cost cuts -- to show Mr. Hancock is moving decisively to improve the company's profit margins.

If these two transactions are "a sign of more divestitures to come, this could be an important first step in the right direction," Josh Stirling, a stock analyst at Sanford C. Bernstein & Co., said Saturday.

By maintaining a majority stake in the mortgage-insurance unit, AIG could continue to book a substantial portion of its earnings and take advantage of certain deferred tax assets that Mr. Hancock maintains would be wasted if the company were immediately split into three parts, analysts said.

AIG's primary focus is property-casualty insurance sold to businesses globally, and life insurance and retirement services sold mostly in the U.S. Before the crisis, it was a leading seller of life insurance in Asia, among many other far-flung operations.

Private-equity firm Lightyear Capital is a buyer in the broker-dealer sale, according to the people familiar with the matter. It wasn't clear if other buyers are involved.

A Lightyear Capital spokesman declined to comment.

AIG's broker-dealer network is known as AIG Advisor Group, with more than 5,000 financial advisers. They work through four different firms: SagePoint Financial, FSC Securities Corp., Woodbury Financial and Royal Alliance.

An AIG spokesman said Friday that the company "continues to take steps to narrow its focus, improve its financial performance and return capital to shareholders," and that it will disclose more on Tuesday.

(END) Dow Jones Newswires

January 25, 2016 02:47 ET (07:47 GMT)

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