Wall Street's senior activist/raider Carl Icahn called Wednesday for a breakup of American International Group after taking what he called a "large stake" in the insurance giant.
In an open letter to AIG chief executive Peter Hancock, Icahn said that due to regulatory burdens which hamper its business, AIG has become "too big to succeed" and should split into three smaller companies.
"The company continues to severely underperform its peers and is now facing an increasingly onerous regulatory burden which will only further erode its competitive position," Icahn said.
"It is a 'no-brainer' that the simple act of splitting this company up will greatly enhance shareholder value."
Shares of AIG jumped 2.9 percent to $62.71 in midday trade following the release of the letter.
AIG, which had been taken over by the government to prevent its collapse in the 2008 crisis, has recovered its leading role in the US industrial and property insurance market since key international units were sold off and the US Treasury Department disposed of its majority shareholding three years ago.
But since then its huge size has garnered it an official designation as a "systemically important financial institution," which brings more stringent and costly capital requirements.
Icahn said that AIG should "immediately" hive off its subsidiaries in life insurance and mortgage insurance, to create three separate public companies.
"Each would be small enough to mitigate and avert the systemically important financial institution designation," he said.
"AIG is still too large," he said, with the size offering "no net benefit to shareholders."
He criticized Hancock for moving slowly to address the company's underperformance.
"You have shown no sign of urgency and have chosen a 'wait and see... for years' strategy void of decisive leadership. As a result AIG consistently trades at a substantial discount to book value," he said.
In a statement in response, Hancock said the company "welcomes" feedback and ideas from shareholders, without commenting specifically on Icahn's proposals.
"We have taken important and significant steps to reposition AIG by both simplifying and de-risking the company, and realizing attractive valuations from non-core asset sales," he said.
"We remain on course and are determined to continue and accelerate these efforts."