NEW YORK (TheStreet) -- Shares of American International Group (AIG) - Get Report are rising by 2.72% to $62.58 at the start of trading on Wednesday morning, after billionaire activist investor Carl Icahn said he believes the insurance company should split into three separate entities.
"It is my experience that in Corporate America, even when all available data points to the same undeniable conclusion and when all stakeholders desire the same mutually beneficial outcome, an external force is often still required to effect meaningful and positive change. This is the current situation in which AIG shareholders find themselves," Icahn said in a letter to AIG CEO Peter Hancock.
"The company continues to severely underperform its peers and is now facing an increasingly onerous regulatory burden which will only further erode its competitive position. Despite definitive action on the part of Congress and regulators to encourage this company to become smaller and simpler by splitting up, you have shown no sign of urgency and have chosen a "wait and see...for years" strategy void of decisive leadership," Icahn continued.
Additionally, Carl Icahn announced via Twitter (TWTR) that he is holding a "large stake" in AIG.
Icahn believes that AIG should broken up into seperate companies with one selling property-casualty insurance, one selling life insurance and one backing mortgages, according to Bloomberg.
Separately, TheStreet Ratings team rates AMERICAN INTERNATIONAL GROUP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate AMERICAN INTERNATIONAL GROUP (AIG) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Although AIG's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average.
- 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.3%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for AMERICAN INTERNATIONAL GROUP is currently lower than what is desirable, coming in at 27.34%. Regardless of AIG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, AIG's net profit margin of 11.57% compares favorably to the industry average.
- Net operating cash flow has significantly decreased to $105.00 million or 89.09% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: AIG