AIG's stock rose more than 1 percent immediately following the report. (Get the latest quote here.)
In a letter to shareholders, the billionaire activist investor said: "It is abundantly clear to me there is only one sensible path for AIG to follow: become a smaller, simpler company," on a path toward eventually becoming a non-systemically important financial institution (SIFI).
Icahn said that he recently had a discussion with AIG Chairman Douglas Steenland, who agreed that if shareholders' wishes go against those of the CEO Peter Hancock, "the board would definitely listen, take notice, and pay attention to what shareholders want."
Icahn added that he believes the company management's credibility with shareholders is "all but gone."
"I suspect, after two months of waiting, management will release a 'strategic update' on January 26th that fails to present a drastic strategic shift and instead is limited to only incremental changes such as small-scale asset sales and incremental cost cutting," he wrote. "If this occurs then the little credibility management now has will be lost. It is my hope that after the events outlined above and in light of management's poor performance over the last several years, particularly in the property & casualty segment, the board will take matters into its own hands if management still resists drastic change."
In a statement, the company responded: "AIG continues to take steps to narrow its focus, improve its financial performance, and return capital to shareholders. AIG maintains an active dialogue with shareholders, including Carl Icahn. As previously announced, on January 26, AIG will provide an update on its strategy and its proactive plan to drive shareholder value."
In October, Icahn turned up the pressure on AIG to split into three public companies, saying it's "too big to succeed."