AIG still trying to repay bailout
The company sells a stake in AIA Group in efforts to raise $6 billion.
American International Group (AIG) has been steadily repaying its debt to the government after getting a $182 billion bailout in 2008. Now, it's trying to speed that along by selling a 14% stake in Hong Kong's AIA Group.
AIG is offering about 1.7 billion shares in AIA Group, each for between 27.15 to 27.50 Hong Kong dollars. That could raise as much as $6 billion.
The money will be used to pay back part of the bailout that the insurer received at the start of the financial crisis. AIG still owed the government $50 billion at the end of last year, and U.S. taxpayers own about 77% of the company.
It's a good time for AIG to sell its stake. AIA's new business growth increased 40% last year, according to a Hong Kong-based analyst at CCB International Securities. AIA's shares have risen 27% since the company was listed in a $20.5 billion IPO in October 2010. It was Asia's third-largest public listing.
The sale may be a benefit for AIG and AIA. As AIA becomes more publicly owned, it could be a target for fund managers tracking Hong Kong's Hang Seng Index and the Hang Seng Finance Indexes. It will also become more free-floating, weighing more on benchmarks. The move will decrease long-term overhang, even though it may drive down share prices in the short term.
The sale will also reduce swings in quarterly earnings for AIG. When AIG recorded a $4.11 billion third-quarter loss in November, $2.3 billion was from a decline in the value of AIA shares, which are marked to market price. Then in February, AIG gained $1 billion based on AIA market prices for the year.
AIG will not sell its remaining shares for 180 days, the insurer said in a sales document. AIG owned 33% of AIA, or about 3.96 billion shares, according to a report from AIA on May 31.
The U.S. Treasury has been selling back shares of AIG as the stock surpassed the $28.72 share price needed for the government to break even on its investment. The Treasury sold 200 million AIG shares for $29 each on May 24. Shares closed Monday at $30.41.
AIG has sold more than $50 billion in assets to repay the government, although the rate of selling slowed down when Robert Benmosche became CEO in 2009. Since Benmosche's appointment, the insurer has sold Nan Shan Life Insurance, in Taiwan, for $2.16 billion, and American Life Insurance, now owned by MetLife (MET), for about $16 billion.
AIG shares have climbed 26% this year.
Seriously though, is anyone surprised? This is AIG we're talking about.
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