AIG selling broker-dealer segment, cutting expenses

NEW YORK, N.Y. – Insurer AIG is selling its broker-dealer segment, starting an initial public offering for its mortgage-insurance division and slashing expenses after coming under pressure from activist investor Carl Icahn.

Icahn has been pushing New York-based AIG to break itself into three separate companies.

AIG shares rose more than 2 per cent in morning trading Tuesday.

American International Group Inc. said that it will sell AIG Advisor Group to private equity firm Lightyear Capital LLC and Canadian pension investment manager PSP Investments. Terms were not disclosed. The transaction is expected to close in the second quarter.

The company said the IPO for up to 19.9 per cent of United Guaranty Corp. is a first step toward a full separation.

AIG also announced that it is looking to cut $1.6 billion of expenses within two years.

AIG’s board will return at least $25 billion of capital to stockholders over the next two years through dividends and stock buybacks. It returned $12 billion last year. The company will also create nine business units within its commercial and consumer segments.

“With these actions, AIG has taken another major step in simplifying our organization to be a leaner, more profitable insurer, while continuing to return capital to shareholders and improve shareholder returns,” President and CEO Peter Hancock said in a written statement. Hancock said that the business units being created can either grow within the company, be spun off or sold.

Its shares rose 90 cents, or 1.6 per cent, to $56.26 in morning trading. Its shares have risen 10 per cent over the past year.