Activist investor Carl Icahn has been consistently pushing American International Group Inc. Chief Executive Officer Peter Hancock to "shrink the insurer and boost returns".
In a letter posted on his website, Icahn explained that it would be wrong to waste this opportunity to lay out a new and bold strategy. He said that Hancock should not waste the investors' time explaining the causes and providing excuses for the mishaps and underperfomances done in the past. "Even the announcement of isolated asset sales without a clear commitment to a transformative strategy would be a disappointment and further destroy value," Icahn wrote.
Icahn believes that AIG must follow only one sensible path, and that is to become "a smaller, simpler company with a path to de-SIFI." He further said that if Hancock's plan is only limited small-scale asset sales and cost cutting, then there is a great chance the "little" credibility the management ow holds will be completely gone.
Icahn is considered to be one of AIG's largest shareholders. As such, it is not his first time to give advice to Hancock. In fact, it can be recalled that Icahn first openly scolded Hancock in another letter, dated October of last year, demanding that the latter split into three companies.
Although the recent letter does not talk about splitting the company, it does lay challenges for Hancock.
The activist also wants a more improved financial disclosure. "He agreed that if shareholders' wishes go against those of the CEO, the board would definitely listen, take notice, and pay attention to what shareholders want," Icahn wrote. "I was happy to hear this open mindedness because I believe management's credibility with shareholders is all but gone."
Meanwhile, some view Icahn's latest letter as positive, especially for shareholders. For instance, Meyer Shields, an analyst with Keefe, Bruyette & Woods, said in a note to clients: "We think public pressure will force AIG management to support its strategic update with detailed earnings and capital data that can then be monitored in future periods."
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