Enjoying himself.

Carl Icahn has picked the biggest fight of his 79 years on earth, and that's saying something.

By taking on AIG, Icahn is not only taking on an insurance giant that the U.S. Treasury Department couldn't kill (and Hank Greenberg knows in his bones that they tried), he's also arguing with the the ghost of Robert Benmosche, which haunts the place telling everyone that Robert Benmosche saved and returned AIG to unchallengeable glory.

But the brawler from Far Rockaway isn’t necessarily challenging that glory. Uncle Carl would just like to see AIG broken into many smaller, cuter and more lightly-regulated AIGs. He also thinks that those mini-AIGs might be able to create a few extra tens-of-billions-of-dollars for shareholders.

Oh yeah, and Carl’s not at all cool with waiting for a bushel of tiny AIGs as an 80th birthday present [Feb. 16—please mark your calendars]. He’s already planning to buy himself a Congress for that occasion.

“We believe there is no more need for procrastination, the time to act is now,” he wrote. “I cannot fathom how you could ignore repeated requests from shareholders to execute a plan that would release billions of dollars of capital, free the company from onerous excess regulation and leave shareholders owning stock in three separate, market-leading insurance franchises.”

What’s more, taking over the American government is likely to be far, far more lucrative than breaking up AIG, even if it is a good idea, which it seems to be.

It is hard to argue with his logic. AIG shares have traded at a steeper discount to book value than its peers for the past seven years. On a trailing 12-month basis, the shares trade at about a 30% discount to book. Germany’s Allianz, meanwhile, trades at a 19% premium. At the least, this suggests investors don’t think AIG’s current structure generates adequate returns….

So how big could the break-up upside be? Assign the commercial insurance business, which houses property and casualty and mortgage, the 16.7 times multiple of Chubb and the rest of the business Prudential’s 8.1 multiple. That provides a valuation of around $88.5 billion about 11% higher than where the shares currently trade.

And that likely overstates the break-up benefit, as it ignores costs of dividing the businesses and synergies of running a consolidated insurance company. So while Mr. Icahn might have the right idea, it may not result in the kind of bonanza investors associate with activism.

Still, don't cross the mini-AIGs idea of your "Potential Carl Icahn Birthday Presents" list just yet because even if Carl Icahn lives to be 180, AIG might be the biggest piece of financial taxidermy available to him.

There is obviously scope for activists to target the biggest U.S. financial firms given that they have now taken on companies that are of similar size or even bigger, such as General Electric or Microsoft….

The normal tools activists usually employ, such as calling for greater capital returns or levering up the balance sheet, won’t fly in the current regulatory environment. And much as shareholders might like to see the breakup of a big bank – Citigroup and Bank of America haven’t traded above book value in seven years – the political and regulatory challenges likely remain too great.

Carl Icahn Pushes A.I.G. to Split Up [DealBook]
Icahn’s AIG Plan: Good Idea, but Does It Pay? [WSJ]
Icahn Can Take on AIG; Citi, BofA Not So Much [WSJ MoneyBeat blog]