AIG To Split Off Life & Retirement Business

American International Group will separate its life and retirement business from AIG.

The company’s executive management team, with assistance from independent financial and legal advisors and oversight from the AIG Board of Directors, "conducted a comprehensive review of the company’s current composite structure, including strategic, operational, capital and tax implications," the company said in a news release.

As a result of this review, the board has decided to pursue a separation of the Life & Retirement business from AIG. A "simplified corporate structure will unlock significant value for shareholders and other stakeholders," the release said.

AIG provided no details on what form the new life and retirement company would take. The company also announced that Peter Zaffino will become CEO on March 1, 2021, and remain president of AIG. CEO Brian Duperreault will become executive chairman at that time.

One of the largest U.S. insurers, AIG reported a $9.7 billion net loss for the second quarter off $9.4 billion in revenue. Its life and retirement business was a big bright spot overall, reporting $650 million in adjusted pre-tax income on $4.5 billion in revenue.

AIG is scheduled to release third-quarter results Nov. 5, but the company released its catastrophe loss estimates. Net of reinsurance, losses in the company’s General Insurance segment totaled $790 million, before tax, which include $185 million of estimated catastrophe losses for claims related to COVID-19.

Those losses are principally in its travel, event cancellation, trade credit, property, agriculture and casualty books of business, AIG said. Third-quarter non-COVID-19 catastrophe losses of $605 million reflect windstorms and tropical storms in the Americas and Japan, as well as wildfires on the west coast.

“The third quarter experienced a high frequency of global catastrophe events with low to moderate severity, including the ongoing impact of COVID-19," Duperreault said. "These events have had a limited impact on AIG as a result of our underwriting discipline, reinsurance programs, revamped risk appetite and the strength of our balance sheet.”

No Decisions Made

Although no decisions have been made as to how to achieve a full separation of the Life & Retirement segment, the Board’s intent is to accomplish it in a way that "maximizes shareholder value and establishes two independent, market leading companies," the release said.

“Over the last three years, we have taken significant action to de-risk AIG and position the company for profitable growth, including fortifying General Insurance, diversifying Life & Retirement, significantly strengthening AIG’s capital and liquidity position, and building a world-class team," said Duperreault. "This foundational work has positioned AIG to pursue a separation of Life & Retirement enabling both companies to prosper as stand-alone entities.”

“Across AIG, we have made significant progress executing on our strategy to deliver value for our clients, distribution partners, shareholders and other stakeholders," said Zaffino, AIG’s president & global chief operating officer. "Our businesses can be further strengthened by separating Life & Retirement from AIG, which we believe will enable each entity to achieve a more appropriate and sustainable valuation.”

Douglas M. Steenland, speaking on behalf of the AIG Board of Directors, added, “The Board worked closely with executive management as they conducted a comprehensive review of AIG’s composite structure, and AIG’s Directors are confident that a separation of Life & Retirement from AIG will create value for shareholders and benefit all stakeholders.”

Since late 2017, the General Insurance business has been successfully executing foundational work to reposition its portfolio and reduce volatility through disciplined underwriting and expense control within a clearly defined risk appetite and comprehensive reinsurance strategy, the release said.

As a market leader, General Insurance will continue to focus on achieving longterm, profitable growth, the release said. As an independent company, the Life & Retirement business will be well positioned to build value for shareholders by leveraging a broad product portfolio and diverse distribution to tailor its offerings to best meet the evolving needs of customers and distributors, the release said.

Any separation transaction will be subject to the satisfaction of various conditions and approvals, including approval by the AIG Board of Directors, receipt of insurance and other required regulatory approvals, and satisfaction of any applicable requirements of the Securities and Exchange Commission.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.