Photographer: Craig Warga/Bloomberg

AIG to Plan Partial Spinoff of Mortgage-Insurance Business

  • Insurer intends to maintain stake in unit, person says
  • CEO Hancock plans presentation Tuesday to discuss strategy

American International Group Inc., the insurer being pressured by activist investor Carl Icahn to shrink the company, plans to pursue a partial spinoff of its mortgage guaranty unit, according to a person familiar with the matter.

AIG intends to maintain a significant stake in the business, said the person, who asked not to be identified discussing a plan that hasn’t been publicly announced. A partial spinoff could allow AIG to maintain some of the tax assets associated with the United Guaranty business, the person said.

The insurer has scheduled a presentation for Tuesday to discuss Chief Executive Officer Peter Hancock’s vision for boosting returns and narrowing the company’s focus. Icahn has demanded a drastic reshaping of the insurer, whose biggest units offer property-casualty coverage and life policies. Jennifer Hendricks Sullivan, a spokeswoman for New York-based AIG, declined to comment on the plan, which was reported earlier Friday by Reuters.

Mortgage insurers cover losses for lenders when homeowners default and foreclosure fails to recoup costs. Publicly traded mortgage guarantors MGIC Investment Corp. and Radian Group Inc. have plunged in New York trading this year, which could reduce the amount that AIG would be able to get through a sale, John Nadel, an analyst with Piper Jaffray Cos., said Friday in a note to clients. The unit is worth $3 billion to $3.5 billion, he said, lowering the range from his previous estimate of $3.5 billion to $4.8 billion.

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