NEW YORK • Insurer American International Group (AIG) on Monday said its board had approved a plan to separate the life and retirement business from the rest of the firm, and named president Peter Zaffino as chief executive, effective next year.

AIG shares were up nearly 8 per cent in extended trading on Monday.

Mr Zaffino, 53, who succeeds 73-year-old Brian Duperreault, will take charge next March. He will be AIG's seventh CEO since 2005.

The insurer said the separation of the business could take "a couple of years". It added that the board's decision does not rule out a single sale, and any proposed transactions will also need board approval.

The life and retirement business accounted for 34 per cent of AIG's US$49 billion (S$66.66 billion) adjusted revenue last year, compared with 64 per cent for its general insurance business, AIG said last month.

AIG has struggled to right itself after a US$182 billion United States taxpayer bailout in 2008 to save it from collapse. Since then, the company has sold off big chunks to repay the debt plus a US$22.7 billion return.

Analysts see logic in a separation. While the general insurance business is prone to swings from hurricanes, wildfires and other catastrophic events, the life and retirement unit's large investment portfolio makes it highly sensitive to interest rates - and current low rates have been a drag on earnings.

REUTERS