Project Description

AIG Spin-off (Life and Retirement Business) Notes

October 28, 2020 Update

  • On October 26, 2020, American International Group (AIG) announced that the board approved a plan to separate the life and retirement business.
  • Good Reuters article with background information.
  • Morningstar Report.
  • Credit Suisse Report.
  • It also named President Peter Zaffino as CEO starting next year.
  • The separation “will take a couple of years” and may be done through phases such as sales of minority stakes.
  • Life Insurance and Retirement Business
    • Accounts for 34% of AIG’s $49 billion in 2019 revenue.
    • Large investment portfolio makes it highly sensitive to interest rates and current low rates have been a drag on earnings.
    • Credit Suisse values the life insurance and retirement business at 3.4x 2022 earnings, inline with peers BHF, EQH, and LNC. Seems rather cheap!!
  • General Insurance Business
      • Represents 64% of revenue.
      • Business is prone to swings from hurricanes, wildfires, and other catastrophic events.
      • Credit Suisse values the general insurance business at 5.9x 2022 earnings, a 20% discount to P&C peers CB, TRV, and HIG.
  • Credit Suisse SOTP values AIG at $35.

  • Background
    • AIG has struggled to right itself after a $182 billion U.S. taxpayer bailout in 2008 to save it from collapse.
    • It has also had to work through losses from claims in prior years that led to more than $11.2 billion in unexpected reserve increases since 2015.
    • In May 2019, AIG reported its first general insurance underwriting profit since the 2008 financial crisis.
    • In 2015, Carl Icahn established a significant stake in the company and agitated for the company to be broken up. Hedge fund manager John Paulson also supported the break up. Icahn sold his stake in 2018.