Icahn wins board seats at AIG

NEW YORK--After months of resisting their calls to break up the company, American International Group, Inc. (AIG) has given board seats to its two biggest shareholder critics, including a pal of presidential candidate Donald Trump.

The New York company said it will nominate hedge fund manager John Paulson of hedge fund firm Paulson & Co. and Samuel Merksamer, a top lieutenant of hedge fund billionaire Carl Icahn, to the board of directors. It will expand the board to 16 seats from 14 seats to accommodate Paulson and Merksamer, who works for Icahn Capital.

In return, the hedge fund managers have agreed to not to run a contesting board battle, or encourage anyone else to do so.

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Icahn, who was named as a potential head of the Treasury by Trump, has been leading a very public months-long battle over the future of AIG, which provides insurance products to more than 88 million customers, including companies and individuals, in 130 countries around the world.

The billionaire, who recently won a bidding war for auto-repair company Pep Boys, wants AIG to consider splitting into three pieces, arguing that it is "too big to succeed" as a single company. A three-way split would remove AIG from under the "onerous regulatory burden" it faces as a  systemically important financial institution, Icahn said.

AIG's CEO Peter Hancock has rejected a split. And last month he rolled out a plan to simplify the business and boost profits, including through the sale of its network of independent financial advisors.

AIG also vowed to return at least $25 billion of capital to shareholders over the next two years through dividends and stock buybacks.

But the plan did not appease Icahn, who threatened to wage a battle for seats on the board.

Follow USA TODAY reporter Kaja Whitehouse on Twitter: @kajawhitehouse

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