Investors must be convinced that there's an end in sight to the write-downs that caused the largest U.S. insurer to post three quarterly losses totaling $18.5 billion, analysts said. Central to that is selling or shutting down the unit that sold credit-default swaps, the protection for debt investors that plunged in value as the securities they guaranteed declined. Willumstad has said he will unveil a turnaround strategy Sept. 25.
"Everyone wants him to stop the bleeding,'' said John Youngman, who helps oversee $500 million, including 350,000 AIG shares, at Griffin Asset Management Inc. in New York. "A good first step is to simplify the company where possible, get rid of the outlier businesses.''
Willumstad, 63, the former Citigroup Inc. president named CEO in June amid investor uproar over a stock slide that has exceeded 70 percent this year, has said there are "no quick fixes'' for New York-based AIG. Selling units acquired by Greenberg, who ran AIG until 2005, may be necessary as losses from the swaps -- responsible for more than $25 billion in writedowns during the three previous quarters -- depletes capital and puts AIG at risk of credit downgrades.
"The concern over AIG is that management still does not have its arms around the problems it faces,'' David Havens, a UBS AG credit analyst, said today in a note to clients. "AIG has a variety of options -- but none of them are attractive.''
Businesses that may be sold include American General Finance Corp., the division that makes home and auto loans, said Citigroup analyst Joshua Shanker. The unit generated $2.89 billion in revenue last year, about 2.6 percent of AIG's total. Other candidates include AIG's U.S. variable-annuity business, and a 59 percent stake in reinsurer Transatlantic Holdings Inc., he said.
Asset manager AIG Investments, with 5.1 percent of AIG's revenue, could also be sold, said Gary Ransom of Fox-Pitt Kelton Cochran Caronia Waller. All were acquired under Greenberg.
American General Finance's price could be more than $6 billion if the unit sold for twice its book value. AIG Investments could fetch more than $3 billion if it sold for 2.5 percent of clients' assets under management. The Transatlantic stake is worth about $2.4 billion, based on yesterday's share price. The variable annuity results aren't broken out, making an estimate difficult, said Shanker. AIG acquired the business a decade ago when it bought SunAmerica for $19.7 billion in stock.