Treasury to sell last AIG shares

U.S. poised to add big to rescue’s $15.1 billion profit

Robert Benmosche, chief executive officer of American International Group Inc., speaks at a Nov. 30 event sponsored by the American Chamber of Commerce in Seoul, South Korea. On Monday, the Treasury Department said it planned to sell the remaining AIG shares held by the government stemming from its bailout of the company.
Robert Benmosche, chief executive officer of American International Group Inc., speaks at a Nov. 30 event sponsored by the American Chamber of Commerce in Seoul, South Korea. On Monday, the Treasury Department said it planned to sell the remaining AIG shares held by the government stemming from its bailout of the company.

— American International Group Inc.’s rescue is coming to an end more than four years after the U.S. government took over the company in bid to save the global economy in a bailout that fueled public resentment against Wall Street.

On Monday, the Treasury Department announced it will sell its last 234.2 million shares of AIG in the government’s sixth offering of the insurer’s stock. The sale, which would generate about $7.8 billion at Monday’s closing price, will add to the government’s profit, which was $15.1 billion on the rescue as of mid-September.

The U.S. government owned as much as 92 percent of AIG after saving a firm that insured 100,000 municipalities, retirement plans and companies and was a counterpart to some of the biggest banks.

Federal Reserve Chairman Ben S. Bernanke has said saving AIG after it was hobbled by mortgage-related bets made him “more angry” than any other measure the government undertook to counter the deepest financial crisis since the Great Depression.

“There weren’t a lot of options, let’s face it,” Robert Willumstad, chief executive officer of AIG when the firm was rescued, said in an interview in November. “It was controversial, it was a big risk, but one would argue today that the government got its money back and a healthy profit.”

AIG stock has gained 44 percent this year, closing Monday at $33.36 a share. The stock slipped to $32.80 in extended trading at 5:36 p.m. in New York after the Treasury’s announcement.

Company Chief Executive Officer Robert Benmosche has sold non-U.S. life insurers to help repay the bailout and divested a consumer lender while scaling back derivatives bets since becoming AIG’s leader in 2009. The insurer, once the world’s largest, is now focusing on global property-casualty coverage and life and retirement products in the United States.

AIG had 57,000 employees and about $550 billion in assets as of Dec. 31, compared with 116,000 and more than $1 trillion at the end of 2007. Benmosche, the former chief executive of MetLife Inc. who came out of retirement to run AIG, reached a $4.2 billion deal this week to sell a majority stake in the insurer’s plane-leasing unit to a group of Chinese investors.

The government rescue began on Sept. 16, 2008, the day after Lehman Brothers Holdings Inc. filed for bankruptcy. The Federal Reserve Bank of New York agreed to provide an $85 billion credit line, to expire within two years, in exchange for an equity stake of almost 80 percent.

The initial bailout failed to stabilize the company and was revised at least three times to give AIG more capital and additional time to repay. In March 2009, the insurer reported a record loss of more than $60 billion as mortgage-backed securities slumped. The same day, the Treasury boosted its support, pushing the rescue to $182.3 billion.

This year, Benmosche restored the AIG name to its units, introduced a new logo and agreed to sponsor New Zealand rugby teams, including the All Blacks. He said after reaching the plane-unit deal that AIG is now “leaner, more focused and hungry for tomorrow.”

The need for government bailouts helped push Congress to pass the Dodd-Frank law to limit taxpayers’ cost on failing firms. In October, AIG became the first nonbank to say it’s under consideration by regulators to be labeled a potential risk to the financial system, a designation that could lead to tighter capital rules.

Benmosche has said he is preparing to be “Fed ready” at AIG and is targeting 2013 for reinstating a dividend if the regulator approves. AIG has posted four straight quarterly profits.

AIG has climbed 47 percent since Aug. 7, 2009, the last trading day before Benmosche took over. That compares with a total return of 51 percent for the Standard & Poor’s 500 Index and 33 percent for the S&P 500 Insurance Index.

Before Monday, the U.S. had sold $44 billion of AIG shares in five offerings, and the insurer bought back $13 billion in the sales. AIG will not buy shares in the latest offering, said Jim Ankner, a spokesman for the company. The New York Fed in August finished selling securities that it acquired in AIG’s rescue.

Information for this report was contributed by Hugh Son, Noah Buhayar and Andrew Frye of Bloomberg News.

Business, Pages 23 on 12/11/2012

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