Activist investor Carl Icahn, who’s pushing American International Group Inc. Chief Executive Officer Peter Hancock to shrink the insurer and boost returns, said the CEO’s presentation next week on his vision must offer “a drastic strategic shift.”

“It would be a mistake to squander this opportunity to present a bold new strategy and instead waste investors’ time providing excuses for past underperformance,” Icahn said Tuesday in a letter on his website. “Even the announcement of isolated asset sales without a clear commitment to a transformative strategy would be a disappointment and further destroy value.”

Icahn is looking to increase urgency ahead of New York- based AIG’s Jan. 26 presentation, while the insurer has been seeking a more patient approach. Hancock said in a letter to staff last week that “we will no doubt continue to hear more noise in the next few days.” The CEO said he would pursue a “prudent, insightful plan” with the backing of the board.

Hancock has sold some small units, including operations in Central America and Taiwan. Those deals pale in comparison to the announcement by MetLife Inc. last week that it will sell, spin off or have an initial public offering for a U.S. retail business with $240 billion in assets.

Icahn cited MetLife’s strategy, which is designed partly to limit regulation on operations including U.S. annuities. MetLife and AIG have been designated by a U.S. panel as systemically important financial institutions, a tag that can lead to tighter capital rules.

“There is only one sensible path for AIG to follow: become a smaller, simpler company with a path to de-SIFI,” Icahn wrote. If Hancock’s strategy update is limited to small-scale asset sales and cost cutting, “then the little credibility management now has will be lost.”

AIG, meanwhile, issued the following statement relating to its long-term planning:

“AIG continues to take steps to narrow its focus, improve its financial performance, and return capital to shareholders. AIG maintains an active dialogue with shareholders, including Carl Icahn. As previously announced, on January 26, AIG will provide an update on its strategy and its proactive plan to drive shareholder value.”

Below is Icahn’s full open letter to AIG shareholders, excerpted directly from his website:

——————————————————————————-

Carl C. Icahn

767 Fifth Avenue, 47th Floor

New York, New York 10153

January 19, 2016

American International Group, Inc.

175 Water Street

New York, New York 10038

Attention: Board of Directors

Ladies and Gentlemen:

In the wake of the recent shareholder poll by Sanford Bernstein, the separation announcement by MetLife, and continued conversation with shareholders, it is abundantly clear to me there is only one sensible path for AIG to follow: become a smaller, simpler company with a path to de-SIFI. I recently had a discussion with Chairman Douglas Steenland regarding the upcoming investor presentation and he agreed that if shareholders’ wishes go against those of the CEO, the board would definitely listen, take notice, and pay attention to what shareholders want. I was happy to hear this open mindedness because I believe management’s credibility with shareholders is all but gone. I suspect, after two months of waiting, management will release a “strategic update” on January 26^th that fails to present a drastic strategic shift and instead is limited to only incremental changes such as small-scale asset sales and incremental cost cutting. If this occurs then the little credibility management now has will be lost. It is my hope that after the events outlined above and in light of management’s poor performance over the last several years, particularly in the property & casualty (P&C) segment, the board will take matters into its own hands if management still resists drastic change.

To make matters even worse, management has been either purposely misleading in their public disclosures or is negligently uninformed regarding the feasibility of a de-conglomeration plan. In conversations with management, I learned that disclosures provided on the third quarter earnings call regarding obstacles to de-conglomerating AIG were in some cases materially inaccurate. As an example, members of management have acknowledged to my team that their analysis of the risk posed to realization of the deferred tax assets failed to take into account a realistic time line to execute spin/IPO transactions (i.e. they simply assumed the spin/IPO would be effective the day after the earnings call). In addition, management failed to account, by their own admission to us, for deductibility of foreign tax credits in the event they could not otherwise be utilized. These lapses, in my opinion, show that management has been, to say the least, misleading in telling shareholders they have conducted any meaningful analysis of the impact a de-conglomeration strategy would have on the business – and to say the worst, they may have purposely misstated the facts to both the board and to shareholders. Furthermore, this calls into question the credibility of all other information they have provided on the topic. The fact that this public guidance, which we believe to be misleading and materially incorrect, has not been corrected, even after discussions with us whereby management acknowledged their errors, is simply unconscionable.

We believe that to meet the minimum expectations of stakeholders AIG must address four key concerns:

1. Commit to streamline operations and focus on transforming the company into a competitive, pure play P&C insurer by committing to sell, spin, or otherwise separate non-core operations to de-conglomerate and apply to de-SIFI.
2. Commit to fixing the P&C franchise so that it can generate competitive, double digit return on equity (ROE) through improved underwriting and cost reductions, even if it means bringing in outside talent.
3. Commit to providing additional disclosure so all stakeholders can measure progress along the path outlined above over the next several quarters.
4. Abandon credit default spreads levels as a metric in the long-term incentive plan (we believe this incentive is one reason management is resisting a de-conglomeration as it may negatively impact their bonuses) and instead adopt ROE.

It would be a mistake to squander this opportunity to present a bold new strategy and instead waste investors’ time providing excuses for past underperformance. Furthermore, we believe even the announcement of isolated asset sales without a clear commitment to a transformative strategy would be a disappointment and further destroy value. We look forward to engaging with shareholders, board members, and management regarding the future strategy of the company in the upcoming months.

Sincerely yours,

Carl C. Icahn

*Carrier Management added AIG’s statement and Carl Icahn’s letter to this story.