Bailed-out insurance giant American International Group (AIG) surged Friday morning after appearing to bend to the overhaul plans touted by activist billionaires John Paulson and Carl Icahn.
As Real Money reported, AIG whiffed on earnings Thursday, while simultaneously hiking its dividend and opening the door to board seats for hedge fund manager Paulson, who infamously shorted the 2008 subprime mortgage crisis with a cadre of dealmakers at Goldman Sachs (GS), and Samuel Merksamer, a nominee appointed by Carl Icahn.
After the New York company also booked an after-tax loss of $1.3 billion, nearly a complete reversal from a year-over-year gain of $1.4 billion, shareholders were nonetheless delighted Friday, as AIG stock rose 5% in morning trading.
Both Icahn and Paulson have long been promoting a strategy to split AIG into three leaner insurance components in order to trim costs and shed the company's onerous Systematically Important Financial Institution (SIFI) rating, essentially a "Too Big Too Fail" regulatory brand.
"Despite definitive action on the part of Congress and regulators to encourage this company to become smaller and simpler by splitting up, you have shown no sign of urgency and have chosen a 'wait and see...for years' strategy void of decisive leadership," Icahn said in an October letter to AIG.
But, while AIG had appeared to be taking its own steps to pare down its operations, Thursday's announcemnt was the first move to acknowledge cooperation with the billionaire partners.
"During the fourth quarter, we streamlined our management structure to accelerate decision-making and strengthen accountability," Hancock added. "Our recent strategy update detailed the next chapter of our transformation into a leaner, more profitable and focused insurer."
Icahn promptly Tweeted his enthusiasm, "Happy to announce we reached an agreement to join the board of $AIG," linking to a statement.
"We welcome John Paulson's addition to the board and believe his involvement will be additive, especially in that we both have stated the same goals for AIG," Icahn said. "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."