American International Group Inc. is likely to abolish its life and pension operations through an IPO or a deferred private sale, said its incoming CEO Peter Zaffino on Friday.
The separation of the real estate / claims business and the life and pension business will be completed without the need to raise additional capital for any of the units, but AIG will restructure the debt for the units, Zaffino said.
The real estate / accident business suffered catastrophic losses in the third quarter, including losses from COVID-19, but the unit is expected to show improvements in a continuing hardening market, he said in a conference call with analysts in the third quarter.
"We are currently considering either an IPO or a private sale of up to 1
By selling only 19.9%, AIG would initially retain a certain foreign tax credit until it currently benefits, he said
The Life and Pension Unit will be sold as a whole rather than sold in pieces because " a significant strength of the business is the breadth of its platform and diversified product portfolio and distribution network, "he said.
AIG announced last week that it would separate its property / accident and life business and that Zaffino, who is currently the company's president, would take over from Brian Duperreault as CEO in March 2021.
The decision to abolish the life and pensions department came four years after activist investor Carl Icahn called for the insurer's dissolution, which the then management opposed.
At that time, AIG benefited from a deferred tax asset related to set-off. current results against previous losses. The benefit of the shift has diminished since 2016, and AIG will be able to use the remaining $ 6.6 billion in deferred tax assets before they expire, Zaffino said.
Mr. Zaffino said that AIG had reviewed its composite structure in recent months and concluded that separating the operations would provide more value to shareholders than maintaining the company's existing structure.
Given the improvements in AIG's operations over the past three years, neither the general insurance department, which houses its real estate / accident operations, nor the life and pension department need additional capital to complete the separation, he said.
"This is especially true in general insurance where the capital base is stronger than it has been for many years," said Zaffino.
The separation process will mean new debts being taken up for the life and pension department and restructuring of the debt for the parent company, but both will have "appropriate" leverage levels for its ratings, he said
At the same time, AIG reported $ 281 million in net profit for the third quarter, a decrease of 56.6% compared to the same period in 2019.
the insurer hit $ 790 million in disaster losses during the quarter, including $ 185 million in COVID-19-related losses, which greatly affected its travel and contingency insurance units and its reinsurance business, Zaffino said.
AIG's general insurance business, which has been the subject of reversals, including reducing unprofitable lines and increasing reinsurance purchases over the past three years, reported a net premium ie of $ 5.92 billion in the third quarter, a decrease of 11% from the same period last year.
AIG reported a combined share of 107.2% for the third quarter of 2020, compared to 103.7% in the quarter of 2019. With the exception of disasters, the ratio between accident years improved to 93.3% during the quarter compared to 95, 9% last year.
Commercial prices continue to rise, says Zaffino. AIG expects to report a catastrophic accident rate excluding disasters of less than 90% by the end of 2022, he said.