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AIG plans to retain more than half of life & retirement business post-spinoff

Peter Zaffino AIG logos voting v2.jpg

AIG plans to retain more than 50% interest in its life and retirement (L&R) business immediately after it spins off the unit, CEO Peter Zaffino said Friday.

The company started working on an initial public offering for the unit earlier this year, promising investors the separation would lead to “minimal business disruption”.

Zaffino repeated that pledge Friday during a conference call to discuss third-quarter results, saying that creation of the standalone company is making “considerable progress on a number of fronts”.

“Our goal is to deliver a clean separation with minimal business disruption and emphasis on speed execution, operational efficiency and thoughtful talent allocation,” he explained.

In July, the company struck a wide-ranging deal with Blackstone for a sale of a 9.9% stake in the L&R business.

During Friday’s call, Zaffino said the $2.2bn sale closed during Q3. “We continue to prepare the business for an IPO in 2022, and we'll begin moving certain assets under management to Blackstone,” he told analysts.

The L&R unit delivered strong performance during Q3, Zaffino noted. Boosted by equity market performance, modestly improving interest rates and significant call and tender income, adjusted pre-tax income in the third quarter for the L&R division was approximately $875mn, the CEO pointed out.

Once the IPO is complete, Zaffino said AIG will eventually “fall below the 50% ownership threshold”. The timing of secondary offerings will be based on market conditions and other relevant factors over time, he added.

“As I mentioned on our last call, due to the sale of our affordable housing portfolio and the execution of certain tax strategies, we are no longer constrained in terms of how much of life and retirement we can sell on an IPO.”

The company is still aiming for the spinoff to debut in the 2022 first quarter, but could shift to the second quarter depending on regulatory approvals and market conditions, the CEO said. He expects to have a more specific target date by the Q4 call, which would typically occur in early February.

He also said the company needs “a little bit more time over the next couple of quarters” to provide guidance exactly what the separation will mean to AIG’s capital position. “But we know that is an important guidance in terms of when we are in future state, and we'll work towards that,” he noted.

Zaffino added that Elias Habayeb, who has been with the company for 15 years, was recently named CFO of Life and Retirement, one of a series of executive moves announced last month.

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