Bloomberg News

AIG Extends Decline as Insurer Falls to Lowest in 21 Months

November 24, 2011

(Updates share price in the second paragraph.)

Nov. 23 (Bloomberg) -- American International Group Inc., the bailed-out insurer, extended its decline in New York trading, closing at the lowest price in 21 months.

AIG dropped 4.3 percent to $20.10 at 4:01 p.m. The company hasn’t posted a daily gain since Nov. 11 and is down 58 percent this year.

The insurer faced a “perfect storm” of natural disasters, plunging equity markets and widening credit spreads, Chief Executive Officer Robert Benmosche, 67, said Nov. 4 after the New York-based company posted a $4.11 billion quarterly loss. The result was fueled by a decline in the market value of a stake in AIA Group Ltd., which has gained since the end of September.

“AIG views its balance sheet as strengthened” and is working to improve its return on equity, Jay Gelb, an analyst at Barclays Plc, said yesterday in a note to investors. “We expect its ROE to remain below its life insurance and property and casualty peers.”

The U.S. Treasury Department, which holds a 77 percent stake in AIG, needs to get about $28.72 a share to recoup its investment of more than $40 billion. The government cut its holding from 92 percent in a public offering in May by selling shares for $29 apiece.

Taxpayers rescued AIG in 2008 after bets tied to the housing market soured. Its bailout was revised at least four times and swelled to $182.3 billion. The insurer paid back the remaining $21 billion on a Federal Reserve credit line in January. That month, AIG shareholders received 10-year warrants, which allow them to buy common stock at $45 a share.

The contracts fell 2.5 percent to $5.04 today, the lowest close since they began trading.

--Editors: Dan Kraut, Steve Dickson

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


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