AIG in talks with U.S. on becoming independent
American International Group Inc., the insurer that turned over a majority stake to the U.S. as part of its bailout, is in talks with regulators to become independent, Chief Executive Robert Benmosche said Friday.
“We have commenced discussions with the U.S. government on the process and terms of a complete government exit,” Benmosche told employees in a memo. “Depending of course on market conditions, which could remain volatile, we expect to make meaningful progress in 2010 on repaying the Federal Reserve Bank of New York, and over time fully repaying all of our obligations to taxpayers.”
Benmosche is divesting two non-U.S. life insurance divisions, AIA Group Ltd. and American Life Insurance Co., to help repay the 2008 bailout that swelled to $182.3 billion. The CEO must also improve profits at AIG’s remaining property-casualty and retirement services operations to fully repay the U.S., which holds a stake of almost 80% in the firm.
The insurer has delivered to the Treasury Department a plan that includes replacing the government’s stake with private ownership, according to a person with knowledge of the proposal who declined to be identified because it hasn’t been finalized.
AIG plans an initial public offering for AIA after the collapse of a $35.5-billion agreement to sell the division to Prudential. AIG struck a deal to sell Alico to MetLife Inc. for about $15.5 billion.
After selling the life divisions, New York-based AIG will be “well within striking distance of completely repaying the Fed,” Benmosche said in the memo. AIG separately owed the Treasury Department almost $50 billion, according to a June report from the Congressional Oversight Panel.
AIG shares rose $1.03 to $40.93.
AIG posted second-quarter net income of $1.34 billion, up 17% from the year-earlier period. The operating profit of $1.99 a share was double the average estimate of analysts surveyed by Bloomberg.
Operating profit from U.S. life businesses quadrupled from a year earlier to $1.05 billion as investment income climbed on private-equity and hedge-fund results. Companywide, so-called partnership investments generated a $508 million profit in the quarter, compared with a loss of $193 million a year earlier.
The insurer, once the world’s largest, was first rescued in September 2008 by the Fed. After three revisions, the firm’s lifeline includes the $60-billion Fed credit facility, a U.S. Treasury Department investment of as much as $69.8 billion and up to $52.5 billion to buy mortgage-linked assets owned or backed by the company.
