MetLife May Buy AIG's Alico Unit

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MetLife (MET) may buy AIG's American Life Insurance Co. (Alico) for $14 to $15 billion, according to a report in The Wall Street Journal. If the deal goes through, $9 billion would be used to pay back the Federal Reserve Bank of New York, which largely orchestrated the government's $182.3 billion bailout of AIG (AIG).The proposed Alico aquisition, which represents only a small token of the money that needs to be repaid, is just one of the deals in the works. The public offering of American International Assurance Ltd. could eventually add $36 billion to the payback total.

Even Federal Reserve Chairman Ben Bernanke doesn't expect full pay back to the taxpayers until 2013. In a letter to the Government Accountability Office he says, "As you know, the Federal Reserve and Treasury Department required new management of AIG; we obtained for the U.S. Government a significant stock interest in AIG that materially diluted existing shareholders of AIG; and we required AIG to immediately begin to wind down its systemically risky operations. The Federal Reserve's credit facility is fully secured and should be fully repaid by Sept. 16, 2013, as the company reorganizes and unwinds its operations."

So why does MetLife want Alico, which has lost 50% of its revenue since 2007? MetLife wants to expand overseas and Alico would give it a foothold in 50 countries from Japan to Bahrain. AIG CEO Robert Benmosche used to be CEO of MetLife, so he has been insulated from the talks, which are being handled for AIG by a special transaction committee.

Neither company would comment for the Journal about negotiations, but sources say there is broad agreement on price and they are working on final deal points. Based on what's now known, it's unlikely that the government or AIG will help finance the deal, but AIG may end up taking some MetLife shares.

In a related story, the New York Fed says it did press AIG to avoid making certain disclosures about the government bailout, laying out the details in a statement released Tuesday.

As part of the campaign to reduce criticism from Congress concerning the bailout disclosures, Bernanke promised the Government Accountability Office full cooperation. The New York Fed supported Bernanke saying, "We are in favor of a full and objective review of our actions and look forward to the opportunity to document for the public and members of Congress our involvement in AIG. All of the Federal Reserve's actions regarding AIG were undertaken to protect the American people from an even more severe economic downturn and to safeguard U.S. taxpayers' interests in the company." The New York Fed also said it has provided 250,000 pages of documents to the House Oversight Committee for an investigation being led by Rep. Darrell Issa (R-Calif.).
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