Carl Icahn’s demands for American International Group to split into three different companies may seem over the top to some. More importantly for the P/C market at large, however, is that the hedge fund activist’s plans could actually impair market share and profitability for AIG competitors that don’t get their own houses in order, research finds.

Executive Summary

Even if your company's strategy hasn't been subject to an activist investor's criticism, when activists put the spotlight on your competitors, your results may suffer if you're not proactive, research reveals. Here, researchers and experts weigh in on the prospects of activist investor attacks on the insurance industry and tactics for dealing with them.

Praveen Kumar, finance professor at the University of Houston, co-authored an article that was published in the Journal of Financial Economics in January (2016) suggesting that hedge fund activism does tend to improve the fundamentals of firms that are targeted for change but also has “negative real and stockholder wealth effects on rival firms,” according to a summary by the Journal of Financial Economics. (“The Product Market Effects of Hedge Fund Activism“; abstract available at Harvard Law School Forum on Corporate Governance and Financial Regulation, at http://corpgov.law.harvard.edu, same title, Nov. 17, 2015 entry.)

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