Insurance giant American International Group Inc. (AIG, Financial) today announced that it would expand its board of directors to accommodate two new seats and nominated fund managers John Paulson (Trades, Portfolio) and Samuel Merksamer to fill them.
The board of directors agreed to increase its number of seats from 14 to 16 and to vote on Paulson, the president of Paulson & Co. and Merksamer, managing director of Icahn Capital LP, at the 2016 annual meeting of shareholders in May.
Merksamer has served on several other boards to execute Icahn’s plans on behalf of the activist investor over the years, including at Cheniere (CHK, Financial), Hertz (HTZ, Financial) and Transocean (RIG, Financial).
The AIG director seat fulfills at least one of Icahn’s wishes with the company on which he began advancing this year. On Jan. 19 in an open letter to the AIG board he called for the company to streamline the company by splitting it up, provide clearer disclosure, change management compensation structures and improve operations.
Icahn said in a statement today:
We welcome John Paulson (Trades, Portfolio)’s addition to the board and believe his involvement will be additive, especially in that we both have stated the same goals for AIG. We commend the board for adopting a number of our recommendations over the last few months. We continue to believe that smaller and simpler is better and look forward to working collaboratively with the board and management to help catalyze a turnaround in core P&C operations, a more transparent operating structure, and the ultimate shedding of the SIFI designation.
We believe that AIG stockholders will benefit from our agreement, which permits our representative to share information with our principals and consultants, subject to customary confidentiality restrictions. I hope and believe that we will work with AIG’s board to enhance value as we have done with so many other boards and companies in the past.
His board presence will make it more likely that his plans are further executed, though the company has already adopted some of his proposed changes. On Jan. 26, in response to communications with Icahn, it issued a strategy to transform into a “leaner, more profitable and focused insurer,” such as returning $25 billion in capital over the next two years, begin spinning off its United Guaranty Corporation, a string of divestitures and exits, and others. It also said it would organize its operations into nine business units, each reporting individual financial results.
AIG on Thursday made good on its promise to expand shareholder returns, announcing a $5 billion share repurchase plan and a 14% increase to its quarterly dividend to 32 cents from 28 cents per share. The company had repurchased $2.5 billion for 2016 through Feb. 11, giving it a total remaining authorization to purchase $5.8 billion in shares.
It also announced plans to hold an initial public offering of United Guaranty Corporation upon regulatory approval.
For the fourth quarter, AIG on Thursday reported $a net loss of $1.8 billion, or $1.5 per diluted share, compared to net income of $655 million, or $0.46 per diluted share, for the prior-year quarter. Shares have fallen more than 18% since the start of the year, to $50.58 at close, with a P/B ratio close to a two-year low at 0.67.
See more of Carl Icahn (Trades, Portfolio)’s portfolio here. See John Paulson (Trades, Portfolio)’s portfolio here.Â
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