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Shares in AIG dropped 9.4 per cent on Wednesday after a $3bn quarterly loss raised fresh concerns about the insurer’s recovery efforts and the disclosure that hedge fund Paulson & Co almost halved its stake – even though it has a seat on the board.
A day after AIG disclosed its fourth loss in six quarters, chief executive Peter Hancock told investors that the company was lowering targeted returns this year, citing lower income from investments.
Meanwhile, the fund led by the activist John Paulson – an AIG director – disclosed in a regulatory filing that it had slashed its stake by 46 per cent.
Mr Paulson had been one of AIG’s top 20 shareholders. As a result of the sale, his fund had become the 38th biggest, according to Bloomberg data, with a 0.48 per cent stake as of the end of the year.
It is unusual for activists to sell stakes while on the board. Activists tend to stand aside before selling down. Mr Paulson would not comment.
AIG booked a $5.6bn charge in the fourth quarter because claims costs on commercial insurance policies, including workers compensation, are swelling.
The company is now aiming for a “normalised” return on equity from its core insurance operations of 9.5 per cent, compared with the 10 per cent goal it set at an investor day in November. It delivered 7.8 per cent last year.
Mr Hancock — who has been disposing of assets and cutting costs in an attempt to revive AIG’s fortunes — said the insurer was on the right track. He said the the insurer was positioned for “more sustainable earnings in the future”.
“We knew that a transformative undertaking of this scale and complexity would not happen overnight,” he said. “We also knew that progress would not be made in a straight line. There are no quick fixes.”
Mr Hancock said the threat of future reserve charges had been reduced by a reinsurance deal AIG struck last month with Warren Buffett’s Berkshire Hathaway.