Government stake in AIG 'to be sold off'

27 September 2010

The US Treasury is gearing up to offload its stake in AIG and return the lender to independence.

Insiders told Bloomberg that details of how the government body intends to recoup taxpayer money handed over to AIG during the financial crisis may be made official as early as next week.

Since September 2008, AIG has received more than $182 billion from the state, including a Treasury investment of almost $70 billion and the further provision of $52.5 billion to buy mortgage-linked assets that were backed or owned by the company.

The key part of the strategy to recoup that money will involve the Treasury converting a $49 billion preferred stake into common stock, with sales of the shares set to commence in the first half of 2011.

AIG is itself making efforts to repay the Federal Reserve credit line that was part of its bailout.

Robert Benmosche, the firm's chief executive officer, has said the sales of two of AIG's divisions - AIA and American Life Insurance Co – are nearing completion and will help achieve this goal.

AIA is likely to be put up for an initial public offering next month, while MetLife is set to buy American Life Insurance Co before the start of November for around $15.5 billion.

Mark Herr, a spokesman for AIG, said the financial institution is aiming to rebuild investor confidence by repaying taxpayers and turning into a "strong, independent company" over time.

"We have been in discussions with the US Treasury, the Federal Reserve Bank of New York and trustees of the AIG Trust over the terms of the government's exit from AIG," he confirmed.

Earlier this year, Prudential's $35.5 billion bid for AIA collapsed after shareholders in the former company criticized the deal as too expensive and AIG rejected a subsequent lower offer that was made.

By Gary Cooper

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development