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Icahn urges AIG to split Into three, says it’s ‘time to act’

By Katherine Chiglinsky

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(Bloomberg) — Carl Icahn, the billionaire investor known for picking fights with corporate boards, said American International Group Inc. should split into three companies, one selling property-casualty coverage, another selling life insurance and a third backing mortgages. The stock rallied in early trading.

“There is no more need for procrastination,” Icahn said in a letter posted on his website Wednesday and addressed to AIG Chief Executive Officer Peter Hancock. “The time to act is now.” Icahn said on Twitter that he holds a “large stake” in AIG.

While AIG has climbed about 8.8 percent this year through Tuesday’s close, the insurer still trades for less than 80 percent of book value, a measure of assets minus liabilities. Travelers Cos., the lone property-casualty insurer in the Dow Jones Industrial Average, trades for more than 1.4 time book value.

Icahn said a split would help AIG limit regulation. The insurer has been deemed by a U.S. panel as a systemically important financial institution because of its size, a designation that brings increased Federal Reserve oversight.

“You must acknowledge that enhanced regulation is intended to be a tax on size,” Icahn wrote in his letter.

Hancock, who took over as CEO last year, reorganized AIG into two main divisions so that one focuses on commercial clients and the other on individual consumers. He said that responds to customer demand and makes more sense than the previous split, which had a life unit and a property-casualty operation.

The insurer has “taken important and significant steps to reposition AIG by both simplifying and de-risking the company,” Hancock said in a separate statement. “We remain on course and are determined to continue and accelerate these efforts.”

AIG jumped 3.9 percent to $63.30 at 9:23 a.m. in New York.