Bloomberg News

AIG Hits 14-Month Low as Insurer has ‘No Investor Constituency’

June 03, 2011

June 3 (Bloomberg) -- American International Group Inc., the bailed-out insurer, fell to the lowest in more than a year, as investors bet the U.S. Treasury Department may struggle to find buyers for the rest of its shares.

The insurer dropped 36 cents, or 1.3 percent, to 27.65 at 4 p.m. in New York Stock Exchange composite trading, the lowest closing price since March 9, 2010. AIG plunged 43 percent since Dec. 31, the biggest decline in the Standard & Poor’s 500 Index.

The Treasury plans to sell more stock in New York-based AIG after lowering its stake to 77 percent in a May 24 offering. Demand from investors waned after a shortfall in insurance reserves forced the firm, led by Chief Executive Officer Robert Benmosche, to take a $4.2 billion fourth-quarter charge.

“There seems to be essentially no investor constituency for AIG,” said Paul Howard, director of research at Solstice Investment Research in Glastonbury, Connecticut, in a note today. “Inherent inconsistencies with reserves and business prospects going forward” may also weigh on the stock, he said.

The Treasury, which raised $5.8 billion selling shares at $29 each, supports Benmosche, according to Tim Massad, the department’s acting assistant secretary for financial stability.

“He has done a great job, as has the entire management team, in turning around the company,” Massad told Carol Massar and Matt Miller on Bloomberg Television’s “Street Smart” on May 25. “A lot of people thought this company would just collapse.”

AIG stock almost doubled in 2010, Benmosche’s first full year with the company, after slumping the three prior years.

The Treasury had converted its preferred stake for 92 percent of AIG’s common stock in January. The department had invested $47.5 billion for the holding, meaning it got its AIG stock for an average of about $28.73 a share.

--Editors: Dan Kraut, Rick Green

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus