AIG to float two units to pay back Fed
AMERICAN International Group (AIG) is to float two of its international life insurance divisions to fund the repayment of $25bn (£15.3bn) in loans it took from the Federal Reserve.
The insurance giant, which has received $173.3bn in government bailouts since the onset of the financial crisis, said it would launch initial public offerings for both American Life Insurance (ALICO) and American International Assurance.
AIG agreed the measure with the Fed in March and will now follow through by putting equity from both units into two special purpose vehicles, taking common and preferred stock in the entities.
It will then hand the Fed $25bn in preferred stock to reduce its debt, keeping the common stock for itself.
The insurance giant said it expects the deals to close in the second half of the year, with both divisions expected to float on an as yet unnamed Asian exchange.
ALICO does businesses in 50 countries, while American Life Insurance focuses on Asia.
AIG has already sold several units in a bid to pay back the government, including the disposal of two-thirds of its stake in reinsurer Transatlantic Holdings for nearly $1bn.
ALICO chairman and chief executive Rodney Martin Jr. said the plan “accelerates the movement of ALICO toward greater independence and helps maintain the value of the franchise”.
The US government rescued AIG from the brink of going under last year as the firm suffered from its exposure to credit default swaps.
The firm was bailed out with an $85bn rescue, which handed the government a 79.9 per cent stake and saw chief executive Robert Willumstad replaced with Edward Liddy.
The scale of the bailout has since ballooned to just over $173bn, after AIG reported a $61.7bn fourth quarter loss in 2008, the largest quarterly loss in corporate history.