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Carl C. Icahn, the activist investor, will gain a seat on A.I.G.’s board. Mr. Icahn and his various investment funds own 42.7 million shares of A.I.G., or 3.46 percent.
Two billionaire investors who have been agitating for the breakup of American International Group have gotten seats at the table of the giant insurer.
Carl C. Icahn, the activist investor, and John Paulson, the hedge fund manager, will gain two seats on A.I.G.’s board, though Mr. Icahn said on Thursday that he would appoint an associate of his investment firm instead of himself because he is occupied with several other companies.
The agreement reached on Thursday will add two directors to the board at A.I.G.’s annual shareholder meeting in May, expanding the board to 16 seats from 14 seats.
The announcement puts to an end nearly four months of bitter debate between the activists and A.I.G., which has resisted calls to break apart.
The investors had been pressuring A.I.G. to split up to get out from under the federal government label of being a “systemically important financial institution,” a designation that brings extra regulatory scrutiny and costs.
But A.I.G.’s management rebuffed the idea that smaller was better. The two sides continued talking in the last few weeks.
In a statement on Thursday, Mr. Icahn said, “We continue to believe that smaller and simpler is better and look forward to working collaboratively with the board and management to help catalyze a turnaround.”
A.I.G. announced last month plans to streamline through cost-cutting, a spinoff of its mortgage insurance business and the sale of its financial advisory unit. A.I.G. is also dividing its operations into distinct units that will make them easier to sell or spin off in the future, based on their performance.
But that fell far short of the demands of Mr. Icahn and other shareholders. Mr. Icahn and his various investment funds own 42.7 million shares of A.I.G., or 3.46 percent.
In several recent securities filings, he has hinted as his plans to propose his own slate of directors. Participants in any proxy solicitation would include various funds associated with Mr. Icahn and could include Samuel Merksamer and Courtney Mather, both lieutenants of Mr. Icahn’s who have board seats at other companies in which Mr. Icahn holds a stake, the filings said.
In three letters to A.I.G.’s board and management since October, which he also released to the public, Mr. Icahn increased the pressure, saying he had the support of other investors, including Mr. Paulson, the president of Paulson & Company. He declined to comment.
They had demanded a more radical shift — the separation of A.I.G.’s life insurance business from its property and casualty division, plus the sale or spinoff of the mortgage insurance unit.
Mr. Icahn has been talking with A.I.G. management and the chairman but has expressed frustration and impatience with the pace of the talks. In November he said he would be preparing a consent solicitation for shareholders that may propose to add a new director who could succeed A.I.G.’s current chief executive, Peter Hancock.
The company’s strategic plan, outlined on Jan. 26, didn’t completely quiet the skeptics. Josh Stirling, an analyst with Sanford C. Bernstein who also has been critical of A.I.G.’s management, said in a recent research note: “We like many are torn between the incremental positives the firm revealed and the frustrating feeling that A.I.G.’s leadership does not have the vision or credibility to truly handle the job.”
A.I.G. also reported a $1.3 billion fourth-quarter loss after Thursday’s market close, or $1.10 a share.
Shares of A.I.G. fell 3.7 percent on Thursday.
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