AIG Mulls IPO for Life & Retirement Unit: Report

AIG building photo with split-in-two graphic treatment

American International Group says it is considering options for its Life and Retirement business, including an initial public offering or a private sale of a nearly 20% stake in the unit, according to a Reuters report.

The development comes about 10 days after AIG said it plans to split off its life and retirement operations from the rest of the company in 2021.

"We currently contemplate either an IPO or a private sale of up to 19.9% of Life and Retirement, followed by one or more dispositions of our remaining ownership interest over time," President Peter Zaffino said on a call with equity analysts early Friday and covered by Reuters.

Zaffino will take over as CEO from Brian Duperreault in March.

AIG, however, is not planning to separate the life and retirement operations or sell them as two entities, according to the news report. Instead, it aims to use proceeds from the sale to reduce debt, CFO Mark Lyons told analysts Friday.

This type of divestment was first advocated by investor Carl Icahn in 2015.

Third-Quarter Results

On Thursday, AIG reported a 57% year-over-year drop in net income to $281 million for the third quarter of 2020 vs. $648 million in Q3'19. Earnings per share fell 56% to $.032 vs. $0.72.

After removing one-time items, adjusted earnings were $709 million — ahead of analysts' estimates and up 40% from $505 million in the year-ago period. Adjusted EPS rose 45% to $0.81 from $0.56.

Total catastrophe-related losses, net of reinsurance, were $790 million, up 37% from $487 million in Q3'19.

For instance, the insurer recorded an underwriting loss of $432 million tied to claims from windstorms and tropical cyclones in North America and Japan and wildfires on the West Coast. It also had $185 million of estimated COVID-19 losses, mainly linked to its sales of insurance for event and travel cancellations.

"The high frequency of natural catastrophes and COVID-19 had a limited impact on financial results," according to Duperreault.

Adjusted pretax income in its Life and Retirement business was $975 million compared with $646 million a year ago.

The company says these results reflect "strong equity market performance, favorable short-term impacts from lower interest rates and tighter spreads, and lower general operating expenses, partially offset by base spread compression and unfavorable impacts from COVID-19 mortality."

— Related on ThinkAdvisor: