AIG missed its earnings target with its fourth quarter earnings report and it missed big. With reality setting in, it seems the bailed out insurance giant is finally ready to give in to billionaire activist investor Carl Icahn, causing shares to jump as much as 7.2% following the announcement.
Let’s take a look at the highlights of the recent report:
- Earnings per share of -$1.10, missing analyst expectations by $0.19.
- After-tax operating loss of $1.3 billion, versus an operating income of $1.4 billion a year ago.
- The company announced it would create separate operating and legacy portfolios to better highlight return on equity in the operating portfolio. This comes after months of pressure from Icahn to split into three companies.
- It authorized buybacks of up to $5 billion and increased its dividend 14% to $0.32 quarterly.
- Management added two seats to its Board of Directors, stating it will nominate John Paulson, president of Paulson & Company, and Samuel Merksamer, a managing director at Icahn Capital, to be included in AIG’s proxy statement for election.
- The company plans to move half of its $11 billion investment out of hedge fund investments and into investment-grade bonds and commercial mortgage loans.
CEO Peter Hancock commented on the numbers:
“At the beginning of 2015, we embarked on a three-year plan to transform AIG. Over the past year, we have been implementing our strategy and made significant progress towards our objectives. During the fourth quarter, we streamlined our management structure to accelerate decision-making and strengthen accountability. Our recent strategy update detailed the next chapter of our transformation into a leaner, more profitable and focused insurer. I’m confident that our actions in 2015 positioned us to achieve the goals we’ve set for the next two years.â€
In other words, impatient investors need not apply.
Carl Icahn is the real winner
