NEW YORK (TheStreet) -- American International Group (AIG) - Get Report stock is climbing by 2.11% to $56.53 in morning trading on Tuesday, as the insurance company rejects activist Carl Icahn's calls for it to break into three separate businesses, and announces a sweeping overhaul instead.

AIG plans to spin off its mortgage insurance unit, cut jobs, sell its broker-dealer unit and return $25 billion to shareholders throughout the next two years.

"The $25 billion capital return is eye-catching to say the least," David Havens, a debt analyst at Imperial Capital, told Bloomberg. "They are navigating a middle ground that preserves most of AIG as it is now, but offers the flexibility to spin off or sell units in the future."

The company will offer as much as a 19.9% stake of its mortgage insurance unit United Guaranty in mid-2016, with the ultimate aim of separating the business.

AIG will also sell AIG Advisor Group, a network of broker-dealers, to Lightyear Capital and PSP Investments.

The company will reorganize into nine "modular" business units to better facilitate selling or taking public additional units if they underperform. 

"With these actions, AIG has taken another major step in simplifying our organization to be a leaner, more profitable insurer, while continuing to return capital to shareholders and improve shareholder returns," CEO Peter Hancock said in a statement.

Additionally, AIG has frozen its pension plan and reduced its "top 1,400 employees" by 300, Reuters reports. The company plans additional job cuts later this year. 

TST Recommends

Separately, TheStreet Ratings team rates the stock as a "hold" with a ratings score of C+.

AIG's strengths such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels are tempered by weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

You can view the full analysis from the report here: AIG

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.

Image placeholder title

AIG

data by

YCharts