AIG agrees repayment package with US Treasury

1 October 2010

American International Group (AIG ) made an agreement with the US authorities to repay public money it used to stay afloat during the global credit crisis.

The insurer’s arrangement involves repaying the Federal Reserve Bank of New York (FRBNY) $20 billion worth of debt and allowing the US Treasury to convert $49.1 billion worth of AIG shares it holds into common stock.

AIG is also expecting to transfer ownership of government holdings in its Asian life insurance subsidiary AIA and the American Life Insurance Company.

Robert H Benmosche, AIG president and chief executive officer, said: “This is a pivotal milestone as we deliver on our long-standing promise to repay taxpayers, and we thank the American people for their support.

“We are very pleased that this agreement vastly simplifies current government support of AIG, sets forth a clear path for AIG to repay the FRBNY in full, and sets in motion the steps for the US Treasury to exit its ownership of AIG over time.”

Tim Geithner, Treasury secretary, welcomed the agreement, although he did note that “there is a lot of work ahead” before a resolution will have been made.

He said: “The exit strategy announced today dramatically accelerates the timeline for AIG's repayment and puts taxpayers in a considerably stronger position to recoup our investment in the company.”

The firm anticipates finally paying off the $182 billion rescue package during the first quarter of 2011.

By Jim Ottewill

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