(Bloomberg) -- American International Group’s Sid Sankaran, who has been designated to be the insurer’s next chief financial officer, said that activist investor Carl Icahn’s proposal to break up the company would punish investors by jeopardizing tax assets and pressuring capital measures.
“There are material amounts of shareholder value at risk in a separation of the non-life and life companies,” Sankaran said in a video message posted on the New York-based company’s website Monday.
AIG Chief Executive Officer Peter Hancock and his deputies are seeking to win investor support for a more patient approach after Icahn demanded management act with urgency to shrink the company. The insurer said last week that it plans to eventually exit a mortgage-guaranty unit and designated other businesses for possible sale. Still Hancock said at the time that “there are important tax and diversification reasons that would preclude major divestitures in the short term.”
Icahn first publicly proposed a three-way split in October, saying that the company should break into insurers that focus on life, property-casualty and mortgage coverage. Last month, Icahn said separating assets to focus on P&C coverage would also help the company boost returns and escape increased government oversight.
Sankaran said a split would waste foreign tax assets associated with life insurance profit.
AIG retains more than $15 billion of deferred tax assets, which were accumulated when the insurer was was unprofitable, and the holdings can limit future obligations to the government. Icahn has said that the value of DTAs will fall over time and that Hancock has made “misleading” remarks about how much is at stake. Icahn didn’t immediately return a message left at his office Monday.
The insurer also has $5 billion to $10 billion of “quantitative capital benefits” because of its diversification of life and non-life coverage, which could be compromised in a split, he said. Ratings firms including Moody’s Investors Service have said that AIG’s breadth of offerings is better for bondholders.
The CEO also is seeking to highlight a new generation of leadership after shaking up management in December. Sankaran will take over as finance chief from David Herzog, who will step down after the company posts its annual report.
The insurer’s shares have slipped 8.9% since the beginning of the year, compared with a 5.1% drop in the Standard & Poor’s 500 Index.
--With assistance from Katherine Chiglinsky.
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