American International Group (AIG) has decided to continue with its plans to spin off its mortgage insurance unit amidst its battle with billionaire investor Carl Icahn.
According to CNBC report, this move by the company to do a partial spin-off of its mortgage insurance assets is part of its effort to appease the activist investor Icahn who has been calling on AIG to split into three separate, smaller divisions. Icahn reportedly holds an undisclosed "large stake" in AIG. The insurer's CEO, Peter Hancock, has refused the demand. If the company is divided, Icahn believes shareholders will be able to enjoy return of more cash, and at the same time gain capital cushions by being a systemically important financial institution (SIFI).
In the first three quarters of 2015, AIG's mortgage insurance business had a revenue of $791 million and accounted for 7.3 percent of the company's pre-tax operating income.
AIG is set to release its strategic plans on Tuesday and is expected to reveal the details of the group's plans for is mortgage insurance unit. Along with the strategic plan, AIG is anticipated to provide an update on the sale of its Advisor Group division, according to the sources familiar with the matter, as per CNBC report.
The details are reportedly still under deliberations and are yet to be finalized.
"AIG continues to take steps to narrow its focus, improve its financial performance, and return capital to shareholders. AIG maintains an active dialogue with shareholders, including Carl Icahn," said AIG an emailed statement, according to CNBC.
In a related news, U.S. largest life insurer MetLife has already announced its plans to spin-off its assets. Analysts say this shall put pressure to AIG to do something similar, even bigger, bolder moves to remain competitive in the industry. With this prospect, AIG's shares rose 0.7 percent in midday trade on Jan. 13 following MetLife's announcement to split business into two, MarketWatch reported.