AIG Stock Climbs, Carl Icahn Pushes Separation Plan - TheStreet

NEW YORK (TheStreet) -- American International Group (AIG) - Get Report stock is advancing by 1.51% to $63.15 in afternoon trading on Monday, as activist investor Carl Icahn, who owns 3.4% or 42 million shares of AIG, pressures the insurer to separate into three public companies.

Icahn announced his intention to begin a consent solicitation to grant AIG shareholders the opportunity to express their views to the board and possibly add a director who would agree to succeed Peter Hancock as CEO if asked to do so.

Icahn has spoken with Hancock about the issue a number of times, and Hancock has made it "abundantly clear" that he is unwilling to break up the company, but has not proposed an alternative plan, Icahn said in a statement. 

Icahn added that AIG is too big to succeed and "should accelerate cost cutting and separate into three public companies to shrink below the threshold for systemically important financial institutions." The "systemically important financial institutions" threshold comes with heightened scrutiny and the need to hold significant capital buffers against losses, the  Wall Street Journal said. 

"AIG maintains an active dialogue with shareholders, including Carl Icahn. As previously stated, management and the board have carefully reviewed a separation of AIG's businesses on many occasions, including in the recent past, and have concluded it did not make financial sense," AIG said in a statement today.

Separately, TheStreet Ratings team rates AMERICAN INTERNATIONAL GROUP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate AMERICAN INTERNATIONAL GROUP (AIG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • AIG, with its decline in revenue, slightly underperformed the industry average of 15.5%. Since the same quarter one year prior, revenues fell by 18.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • AMERICAN INTERNATIONAL GROUP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, AMERICAN INTERNATIONAL GROUP reported lower earnings of $5.21 versus $6.07 in the prior year. For the next year, the market is expecting a contraction of 17.8% in earnings ($4.29 versus $5.21).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Insurance industry. The net income has significantly decreased by 110.5% when compared to the same quarter one year ago, falling from $2,192.00 million to -$231.00 million.
  • You can view the full analysis from the report here: AIG

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.