AIG to spin off AIA to pay back government loans
AIG said all the right things in the statement. CEO Liddy was quoted as saying the public listing is "in the best interests of all stakeholders, including U.S. taxpayers, policyholders, employees and distribution partners."
AIG tried to sell AIA last year for up to $20 billion, but no one was interested to pay that much. AIG has suggested it could initially sell up to a fifth of AIA's market value in an IPO on the Hong Konk stock exchange, which now seems to likely be the case, although AIG didn't specify which exchange or how much it will sell in the statement. Depending on market conditions and regulatory approvals, AIG could fetch at least $4 billion for the sale of its Asia crown jewel. AIA has more than 20 million customers, 250,000 agents, assets of more than $60 billion and a broad network of distribution partners and is believed to have an embedded value of $20 billion.
As investment banks battle for a piece of this lucrative deal, the public more likely continues to look at any news out of AIG with more than a little skepticism. The black hole that is AIG received a total of $180 billion in government aid as the government also took an 80 percent stake in the firm.
AIG has been selling assets in recent months to help repay the U.S. government, including last week's announcement about selling its Japanese headquarters for $1.2 billion in cash. At the same time, though, AIG made millions available to its executives in the form of bonuses.
As the FBI is closing in on bringing charges against Joseph Cassano, the man accused of bringing down the insurance giant and for being responsible for the global financial crisis, more people now believe him to just be the fall guy for a company and a system that has plenty of blame to go around. Yes, Cassano probably contributed with the CDS mess he helped create, but it seems the house of cards started long before as the Times of London (via Clusterstock) tells it. "AIG's foray into CDS was really the grand finale," Christopher Whalen, managing director of Institutional Risk Analytics, an expert on banking who has testified before Congress, told the Times. Towards the end, it looked much like a Ponzi scheme. And he's not the first, and probably not the last to say so.
The question is how much stupidity was involved, how much fraud, and who else is to blame, from regulators to company execs. For now, it would just be interesting to see if AIG can sell enough assets to pay back its largest shareholders -- the U.S. taxpayers.