AIG plans IPO or private sale of minority stake in life and retirement business

AIG plans to spin off its life and retirement unit through an IPO or staggered private sale, initially focusing on just under 20% of the business. The firm doesn’t think the split with general insurance will require any additional capital for either unit, but the insurer will restructure debt. AIG recently announced it plans to split off its life and retirement business from P&C operations. The move follows a review of the company’s structure that looked at capital and tax implications, as well as strategy and operations. The decision ends five years of speculation about splitting up AIG. The move was first pushed for by activist investor Carl Icahn in 2015, but AIG’s management resisted. Speaking on a Q3 2020 analyst call, Peter Zaffino, who will take over as AIG’s CEO in March, said: “We currently contemplate either an IPO or private sale of up to 19.9% of life and retirement, followed by one or more dispositions of our remaining ownership interest over time. “We're proceeding with a sense of urgency to determine the initial step of a separation and will continue to engage with regulators and ratings agencies throughout the process,” he added, according to results service Seeking Alpha. AIG is aiming to complete the separation in 2021. The future CEO said AIG doesn’t intend to break up life and retirement and sell it in pieces, because the “breadth of its platform and diversified product portfolio and distribution network” are a “significant strength”. On the same call, current CEO Brian Duperreault stressed that AIG doesn’t think either life and retirement or general insurance will require more capital to operate effectively. Mr Zaffino expanded on this: “Our current expectation is that no additional equity capital will be required, given the improvements in our subsidiary capital positions over the last three years. This is especially true in general insurance, where the capital base is stronger than it's been in many years,” he said. Mr Duperreault said “impediment” to separation of the businesses has “greatly diminished”. He added that tax benefits of AIG’s current structure have decreased over time. Additionally, stronger recapitalisation of its core business means capital diversification benefits are less significant. AIG previously resisted splitting the two businesses because it benefited from a deferred tax asset related to offsetting current earnings against past losses. Mr Zaffino, who will continue in his role as president, said these benefits have reduced and that AIG would preserve some foreign tax benefits by targeting an initial 19.9% in life and retirement. AIG expects to have taxable income post-separation to utilise the remaining $6.6bn in deferred tax assets before they expire. Mr Zaffino explained that a “significant” factor in the decision to separate the businesses is progress made since 2017 to “strengthen the foundation of general insurance” to “materially reduce risk and volatility” in its portfolio. He said the separation would not be possible without a strong general insurance business that can “support itself and thrive” on a standalone basis.

AIG plans IPO or private sale of minority stake in life and retirement business

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