American International Group Inc. has confirmed the partial spin-off of its mortgage insurance unit and has revealed its plans to sell is broker-dealer network, massively cut costs and jobs.
Speaking during a strategy update on Tuesday, AIG Chief Executive Officer Peter Hancock said the board of directors has given go signal to the reorganization of the company into nine different business units, MarketWatch reports.
The insurer will sell 19.9 percent of its United Guaranty Corporation to the public by the middle of the year as an initial step towards full separation. The sell-off of its Advisor Group to Lightyear Capital LLC and PSP Investments for an undisclosed amount will materialize come second quarter of this year.
In the next two years, AIG said it will return as much as $25 billion to shareholders through dividends and share buybacks. The money will come from divestiture of assets and operating performance, among others. In 2015, the company was able to return $12 billion through buybacks and dividends.
As per Reuters, the company has already axe 300 jobs and further cuts are expected throughout the year. AIG's pension plans are said to have been frozen also. The company likewise reduce costs by $1.6 billion.
The move comes in the midst of criticisms from activist investor Carl Icahn who has been pressuring the company to separate into three business units. With the split, 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).
"We're in the business of making large, long-term promises, and so we don't expect all stakeholders to be as happy as others, but we think we've chosen a path here for sustainable value creation," Hancock said in an interview as per Bloomberg. "There are plenty of financial intermediaries that would love a fire sale, and we don't want to play into their hands at all. We want to have a thoughtful reshaping of the company."
