American International Group Inc. named Peter Zaffino as its next chief executive officer and indicated he’ll run a smaller and simpler company as the firm splits off its life-insurance business.

Zaffino, currently AIG’s president, will take over the top job on March 1, when current chief Brian Duperreault becomes executive chairman, the company said in a statement Monday. AIG will also look to separate its life and retirement business, which accounted for about one-third of revenue last year.

Duperreault, 73, recruited Zaffino to join him at AIG shortly after returning in 2017 to try to turn around the troubled insurer. Zaffino initially joined as chief operating officer but quickly took on a role helping fix the insurer’s sprawling property-casualty business. His promotion to president at the end of last year stoked speculation that he would one day succeed Duperreault, and the decision to ditch life insurance serves as a capstone of the pair’s effort to simplify the company.

“AIG’s executive management and board believe a simplified corporate structure will unlock significant value for shareholders and other stakeholders,” the company said of the life-insurance divestment. It said no decision has been made on how to separate the unit.

AIG is a rare U.S. insurer that has both a sizable life and retirement operation and a large presence in the property-casualty market. The company has rebuffed calls to break up the insurer before, most notably through its battle with activist investor Carl Icahn starting in 2015. Icahn, at the time, urged AIG to split up into three companies: one for its property-casualty units, another offering life insurance and one backing mortgages. AIG eventually sold the mortgage insurance business.

Shares of the insurer climbed 7.3 per cent at 4:48 p.m. in late trading in New York Monday. The stock had slumped 39 per cent this year through Monday’s close.

“After years of being poked, prodded and questioned, AIG is finally ready to pull the trigger and step back from its multiline strategy,” David Havens, a credit analyst at Imperial Capital LLC, said Monday in a note to clients. “While bondholders would lose the diversity benefit of a multiline platform, the market shows a clear preference for well-positioned P&C insurers over life/annuity insurers.”

Duperreault’s arrival in 2017 led Icahn to ease his demands for AIG. Duperreault’s focus has centered around fixing the underlying issues at the company that led to frequent charges as the firm was burned by old policies. That included working on shoring up underwriting at its property-casualty business and rejiggering its reinsurance use.

“We are grateful to Brian for his leadership and expertise in guiding the strategic repositioning of AIG’s businesses as market leaders,” Douglas Steenland, independent chairman of the board, said in a statement Monday. “We are extremely fortunate to have an executive of Peter’s caliber and have great confidence about the future of the company under his leadership.”

The company also said in a separate release Monday that it estimates it will take a third-quarter catastrophe loss of US$790 million before taxes and net of reinsurance, with about US$185 million of those costs related to COVID-19. An annual review of assumptions at its life and retirement and legacy businesses will produce a charge of US$7 million after taxes in the third quarter, the insurer said. The company is set to report third-quarter results next week.