AIG Hopes to Launch Life and Retirement IPO by June 30

American International Group continues to move toward selling a large stake in its Life and Retirement business to investors by the end of the second quarter.

The size of the initial public offering will depend on market conditions, Peter Zaffino, AIG’s CEO, told securities analysts today.

“We continue to expect to retain a greater-than-50% interest immediately following the IPO,” Zaffino said.

The Life and Retirement business would pay a cash dividend of $8.3 billion to AIG, and it should still have enough resources to pay annual dividends of $400 million to $600 million to its shareholders, Zaffino predicted.

The business would fund the cash dividend to AIG by issuing bonds.

Zaffino said AIG wants the Life and Retirement business to do well.

“Our goal remains to achieve a successful IPO of a business with a capital structure that is consistent with its industry peers,” he said. “Life and Retirement has a strong balance sheet and limited exposure to legacy liabilities, and its insurance operations have a history of strong cash flow generation.”

Zaffino spoke to securities analysts during a conference call AIG held to go over results for the fourth quarter of 2021 with securities analysts. The New York-based insurer streamed the call online and has posted a recording on its website.

The comments about the Life and Retirement IPO are similar to what Zaffino said during the conference call AIG held to discuss its results for the third quarter of 2021.

What It Means

AIG’s Life and Retirement business is one of the biggest writers of life insurance and annuities in the world, along with being one of the biggest writers of property and casualty insurance.

The IPO could give the Life and Retirement business a higher profile on Wall Street.

The Earnings

AIG as a whole is reporting $4.1 billion in net income for the fourth quarter of 2021 on $14 billion in revenue, compared with a net loss of $60 million on $9.7 billion in revenue for the fourth quarter of 2020.

The Life and Retirement business is reporting $716 million in adjusted after-tax income on $6.1 billion in revenue, compared with $772 million in adjusted after-tax income on $4.3 billion in revenue for the year-earlier quarter.

The individual retirement unit, which sells indexed and variable annuities, produced $498 million in adjusted pre-tax income on $1.5 billion in revenue, compared with $552 million in adjusted pre-tax income on $1.5 billion in revenue for the year-earlier quarter. Non-deferrable insurance commissions and related spending increased to $126 million, from $89 million.

Here’s what happened to premiums and deposits for three types of annuities AIG sells:

• Fixed annuities: $802 million (up from $559 million)
• Variable annuities: $1.2 billion (up from $932 million)
• Indexed annuities: $1.3 billion (up from $1.1 billion)

The total yield on the assets supporting the annuities was 4.45%, down from 4.76% in the year-earlier quarter.

The base net investment spread, or difference between the rates it earned on its investments and the rates it paid, narrowed to 2.36%, from 2.59%.

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Peter Zaffino (Photo: AIG)