Carl Icahn's Success In Breaking Up AIG Remains Uncertain

Carl Icahn stated in his latest letter to American International Group Inc (NYSE: AIG)'s board, "my hope [is] that...the board will take matters into its own hands if management still resists drastic change." Analysts at Barclays view this as "Icahn taking every effort to pressure AIG's board to push CEO Peter Hancock to break up the company." However, the firm is not sure if Icahn will be successful.

Barclays noted that they do not see any "major retrenchments," while AIG is currently under "heavy pressure" to improve results from Carl Icahn. The activist investor currently owns a 3.4 percent stake in AIG.

Related Link: Carl Icahn Issues Another Open Letter To AIG

Pressures For Success

"Despite MET's decision this month to jettison a significant portion of its US life and annuity business, we doubt AIG will announce a break-up because AIG depends on its US life and retirement services business to service debt and fund significant buybacks," Barclays noted. "If AIG broke up, it could also result in losing at least one-third of its $15 billion ($11/share) deferred tax assets (Mr. Icahn disputes this). If AIG's plan falls short of Mr. Icahn's expectations, we expect increased pressure on AIG's board to act decisively."

The Barclays' note continued, "AIG will likely announce a spin-off of its mortgage insurance business as part of its strategic update on January 26 based on media reports," Barclays commented. "We anticipated this result and doubt it would result in much value being unlocked within the scope of AIG's current $68 billion market cap," the firm noted in a research note Friday.

The firm sees AIG's commitment to large share buybacks and increased expense savings targets as "likely." However, Barclays does not see any break-up to be announced by AIG of its life and annuity units.

Image Credit: "AIG Lobby at 70 Pine Street" by David Shankbone - Own work. Licensed under CC BY 3.0 via Wikimedia Commons.