Split AIG into two units, former chairman says

Bailed-out insurer AIG should be broken up eventually because its two main businesses have “no strategic fit between them,” according to Harvey Golub, its former chairman.

“Longer-term, AIG shouldn’t exist,” he said in an interview that aired last week on Bloomberg Television’s “In the Loop with Betty Liu.” American International Group Inc. should be split, making independent firms of its Chartis Inc. property-casualty unit and SunAmerica Financial Group life insurer, Mr. Golub said.

“When it gets broken apart, as I think ultimately it will, both of those pieces may unlock much greater value,” he said.

Chief executive Robert Benmosche is reshaping AIG, once the world’s biggest insurer, to repay a $182.3 billion government rescue. He is enticing investors to purchase the Treasury Department’s 92% stake by presenting the firm as a global property-casualty insurer and a U.S. seller of life insurance.

That strategy probably won’t last, the former chairman said.

Mr. Golub, 71, who is also a former chairman and chief executive of American Express Co., was hired at AIG in 2009 to help oversee asset sales and simplify a company that leased planes, held derivatives and insured mortgages. He clashed with Mr. Benmosche over the divestiture of AIG’s biggest non-U.S. life insurance unit, AIA Group Ltd., and was replaced in July by Steve Miller,

DIFFERENT VIEW

“[Mr. Benmosche] has a different view of the role of the board than me,” Mr. Golub said. “His was that the board should be more supportive and more agreeable, and ours was that it was an independent board to exercise oversight and not just agree.”

Mr. Benmosche, 66, identified Chartis and SunAmerica as “the core of AIG’s nucleus of businesses” in a June letter to employees. AIG also owns mortgage insurer United Guaranty Corp. and International Lease Finance Corp., an aircraft-leasing company.

Jonathan Hatcher, a Jefferies Group Inc. analyst, said that investors might benefit if the main units are split.

“No one in management would ever say this, because it creates uncertainty, but you could actually argue the company is worth more broken apart,” said Mr. Hatcher, a former Federal Deposit Insurance Corp. bank examiner. “Equity investors are going to be valuing the parts separately anyway.”

Insurance companies often focus on either property-casualty or life coverage.

Prudential Financial Inc. concentrates on life insurance, after once having sold auto, home and health coverage.

The Travelers Cos. Inc., the only insurer in the Dow Jones Industrial Average, was spun off from Citigroup Inc. in 2002 as a property-casualty company. Citigroup sold its Travelers brand life insurer to MetLife Inc. in 2005.

“Chartis and SAFG are separate companies and always have been,” Mark Herr, a spokesman for AIG, wrote in an e-mail. He declined to comment about Mr. Golub’s remarks.

AIG has disclosed agreements to divest more than $50 billion in assets since its September 2008 bailout. Edward Liddy, who was chairman and chief executive before Mr. Golub and Mr. Benmosche took over in August 2009, disposed of a Russian bank, a Mexican consumer-finance unit and AIG’s New York headquarters.

Mr. Liddy separated the operations of Chartis from its parent in preparation for an initial public offering, which Mr. Benmosche later halted. Chartis was given its own management and public-relations staff, and a brand, to distance itself from an AIG name that Mr. Liddy had said was “thoroughly wounded and disgraced.”

Chartis, headed by Kristian Moor, does business in more than 160 countries and jurisdictions, selling commercial-property and workers’ compensation insurance and liability coverage for corporate directors. AIG bought SunAmerica in 1999.

Related Topics: American International Group (AIG)