Bloomberg News

AIG’s Sale of AIA Could Cut Treasury Stake, Benmosche Says

February 16, 2012

(Updates with CEO’s comment in fifth paragraph.)

Feb. 15 (Bloomberg) -- American International Group Inc., the bailed-out insurer, may use proceeds from the sale of AIA Group Ltd. shares to reduce the U.S. government’s 77 percent ownership, Chief Executive Officer Robert Benmosche said.

“We can think about using the proceeds if we decide to sell AIA potentially for capital management,” Benmosche said today at a conference in New York sponsored by Bank of America Corp. “Capital management means we can buy some of the overhang from the U.S. Treasury.”

AIG sold about two-thirds of Hong Kong-based AIA in a 2010 initial public offering to raise funds to repay its government rescue. The remaining stake in the Asian insurer, valued at about $13 billion, is part of the collateral backing some obligations to the government, which must be repaid before proceeds from an AIA share sale could be used to buy back AIG shares, Benmosche said.

Benmosche, 67, has focused on improving returns at the New York-based insurer’s global property-casualty unit and U.S. life and retirement division after the firm sold more than $50 billion in assets to repay a 2008 government rescue that swelled to $182.3 billion. AIG hasn’t made a decision on what to do with the AIA shares and would like to pay down its obligations to the government with other funds, including proceeds from the eventual sale of its plane-leasing unit, Benmosche said.

Asia ‘Cold’

“We think it pays to wait,” he said. If “a cold comes over Asia and AIA’s back down to HK$20 ($2.58), and AIG is sitting at $29, it’s going to be pretty tough to want to sell at that point and buy AIG shares.” AIG fell less than 1 percent in New York at 9:42 a.m., to $26.57.

AIA rose less than 1 percent to HK$26.85 today in Hong Kong. The insurer has climbed about 20 percent in the last 12 months. AIG advanced 15 percent this year through Feb. 14, after slumping 52 percent in 2011.

The U.S. Treasury Department sold 200 million AIG shares on May 24 for $29 each. The government needs to receive an average of at least $28.72 a share to recoup its investment. AIG has closed below that break-even price every trading day since July 28.

Benmosche said AIG would entertain bids for its plane- leasing unit, International Lease Finance Corp. The insurer registered to sell more than 20 percent of the business in an initial public offering last year and said it would divest most of ILFC over time.

“People think they can bottom fish, and it’s OK, we’ll entertain anything,” Benmosche said. “Remember ILFC is big.”

--With assistance from Patrick Clark in New York. Editor: 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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