Bloomberg News

AIG Needs Better Results to Speed Treasury Exit, Miller Says

November 18, 2011

(Updates with Miller’s comments starting in the sixth paragraph.)

Nov. 16 (Bloomberg) -- American International Group Inc. needs improving results to lift its stock price and prompt the U.S. Treasury Department to sell a majority stake in the bailed- out insurer, said Chairman Steve Miller.

“Once we have been able to demonstrate the continuing progress we are making, cleaning up our act at AIG, have a solidly profitable growing company, I think then the stock will move to a point where the Treasury says now is our time to exit,” Miller told Betty Liu today on Bloomberg Television’s “In the Loop.”

AIG posted a $4.11 billion third-quarter loss Nov. 3 after what Chief Executive Officer Robert Benmosche, 67, described on a conference call as a “perfect storm” of plunging equity markets, widening credit spreads, unfavorable changes in currency exchange rates and natural disasters. Declines in the value of AIG’s stakes in a former Asian subsidiary and mortgage- related assets, as well as impairments on aircraft at its plane- leasing unit, contributed to the loss.

The insurer was little changed at $23.10 at 10:56 a.m. in New York today. The shares have fallen more than 50 percent this year. The Treasury reduced its AIG stake to 77 percent from 92 percent by selling 200 million shares at $29 apiece in May. The government’s break-even price is about $28.72 a share.

Maurice “Hank” Greenberg, who led AIG for about four decades through 2005, said last week that the U.S. will be a part-owner of the insurer for a “very long time” because of the overhang that the Treasury’s stake puts on the stock.

Share Repurchase

AIG’s board authorized a $1 billion share repurchase program this month, the first for the insurer since its 2008 government rescue. AIG is approaching buybacks as “a worthwhile long-term investment,” Miller said today in a separate interview at Bloomberg headquarters in New York.

Insurance companies have historically traded at 100 percent to 200 percent of book value, he said. That compares with AIG’s price of about half of book value, a measure of assets minus liabilities. Miller declined to comment about whether AIG would repurchase shares at current prices, saying the company must weigh the valuation against the possibility of turmoil in financial markets and the effect that near-record low interest rates may have on profits.

“The last board on Earth that wants to take a reckless risk with liquidity and capital is the AIG board,” Miller said.

--With assistance from Maryellen Tighe in New York. Editors: William Ahearn, Rick Green

To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net; Andrew Frye in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net


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