Update: AIG Weighs IPO or 19.9% Stake Sale of Life and Retirement Unit

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Insurer American International Group Inc said on Friday it is considering an initial public offering or a private sale of nearly 20% of its life and retirement business to separate the unit from the rest of the company over the coming year.

The comments during a quarterly earnings call offered further detail on how it might carry out the long-discussed divestiture, which it announced last week.

“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 the call. AIG last week named Zaffino to take over as chief executive officer in March.

AIG shares surged as much as 6% on Friday but pared gains to trade up 0.4% at $33.57 in mid-afternoon.

Zaffino said AIG had no plans to break up the life and retirement unit and was aiming to finish the separation of the business in 2021.

The company plans to use proceeds to reduce its debt, Chief Financial Officer Mark Lyons said.

Activist investor Carl Icahn pressed for divestiture in 2015, but the deal raised concern about deferred tax assets. Zaffino said on Friday that this issue, involving $6.6 billion of such assets, was “no longer an obstacle.”

The company reported a slump in third-quarter profit on Thursday, hurt by losses related to storms, wildfires and the COVID-19 pandemic. Its adjusted EPS of 81 cents beat estimates.

Adjusted pretax profit in the general insurance business declined by 18%, but rose 51% in the life and retirement unit.

Global insurers are battling a sharp rise in natural catastrophe payouts at a time of coronavirus-induced losses. The investments that insurers rely on to pay claims have also come under pressure.

(Reporting by Noor Zainab Hussain in Bengaluru, Suzanne Barlyn in Washington Crossing, Penn., and Alwyn Scott in New York Writing by Anirban Sen Editing by Aditya Soni and Matthew Lewis)

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