Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

AIG moves into the black for top holder: U.S.

By Jessica Dickler, staff writer


NEW YORK (CNNMoney.com) -- The Treasury Department's multi-billion dollar bailout of American International Group moved into the black after the insurer completed two transactions that raised nearly $37 billion, the department said Monday.

The U.S. government would make a profit on the bailout if it is able to sell its investment in the insurer at the current price over a period of time -- something that is not a sure thing.

The Treasury statement came after AIG announced the completion of the sale of an insurance subsidiary, American Life Insurance Company, or ALICO, and the initial public offering of a second, AIA Group Limited, or AIA, which together raised about $36.71 billion.

The insurer said it expects to use the cash proceeds from the transactions to repay the credit facility extended to AIG by the Federal Reserve Bank of New York (FRBNY) and to make payments on other interests owned by the government.

"We promised the American taxpayers we would repay them and the initial public offering of AIA last week and the completion of the ALICO transaction move us closer to delivering on our promise," Robert Benmosche, AIG president and chief executive, said in a statement.

"These transactions will generate sufficient cash to allow AIG to pay off the FRBNY credit facility, marking a major milestone in our commitment to repay the American taxpayers," he added.

After the credit facility is repaid in full, the company has said the U.S. Treasury will exchange its $49.1 billion of preferred shares into 1.6 billion AIG common shares, a 92.1% stake in the company.

Based on Friday's closing price, Treasury said the shares would be worth $69.5 billion, well above the department's current $47.5 billion cash investment in the insurer.

The company received bailout funds through the $700 billion Troubled Asset Relief Program (TARP), which Congress passed during the height of the financial crisis in October 2008. The government's loans to AIG totaled more than $180 billion at one time, and the company became one of the largest recipients of taxpayer assistance.

AIG's (AIG, Fortune 500) stock edged lower in midday trading. To top of page

Search for Jobs

Index Last Change % Change
Dow 18,308.15 164.70 0.91%
Nasdaq 5,312.00 42.85 0.81%
S&P 500 2,168.27 17.14 0.80%
Treasuries 1.61 0.05 3.28%
Data as of 1:59pm ET
Company Price Change % Change
Procter & Gamble Co 89.75 1.52 1.72%
Bank of America Corp... 15.65 0.49 3.23%
Chesapeake Energy Co... 6.27 0.15 2.45%
Wells Fargo & Co 44.28 -0.09 -0.20%
Cognizant Technology... 47.71 -7.29 -13.25%
Data as of Sep 30
Sponsors

Sections

On September 8, Americans learned that Wells Fargo had fired 5,300 employees for secretly creating as many as 2 million unauthorized accounts. It's been a hellish month for the bank. Lawmakers have called Wells Fargo a "criminal enterprise" guilty of a range of crimes, including conspiracy to commit fraud and have called on the CEO to resign. More

China is no longer offering Venezuela new loans, according to experts. It spells bad news for Venezuela, which relied heavily on Chinese finance. More

These startups are helping landlords and cities sniff out illegal short-term rentals. More

U.S. Labor Secretary Tom Perez writes about why the Labor Department introduced a new rule requiring federal contractors to provide paid sick leave to workers. More