Paulson exit from AIG would remove leading split advocate, analysts claim

If hedge fund manager John Paulson leaves the board of AIG as suggested by a media report, this would remove one of the leading advocates of splitting up the insurer, CreditSights analysts wrote in an April 12 note.

A report from the Financial Times suggested that Paulson was set to leave the board of insurer AIG. It comes little more than a year after Paulson secured boardroom representation along with fellow activist Carl Icahn in May 2016.

Paulson has been pushing for a separation of AIG’s life business, property and casualty insurance arm and the mortgage business. The move followed challenging underwriting results and uncertainty regarding the impact of a potential SIFI (systemically important financial institution) designation of AIG.

Paulson’s purported exit follows a major reduction in his fund’s stake in AIG.

The insurers’ management does not believe that a split of the company is an appropriate strategy. Arguments against it include the potential for a ratings downgrade, negative tax implications, the loss of economies of scale and some ability to cross-sell.

AIG’s CEO Peter Hancock has recently resigned following a $3 billion net loss in the fourth quarter of 2016 citing a loss of support from shareholders as the reason.

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