AIG Raises $37 Billion to Repay U.S. Government
AIG said it closed the sale of insurance subsidiary American Life Insurance Company (ALICO) to MetLife (MET) today for approximately $16.2 billion, including approximately $7.2 billion in cash and the remainder in MetLife securities.
Together, the AIA and ALICO transactions raised approximately $36.71 billion, $27.71 billion of which was in cash proceeds. AIG expects to use the cash proceeds to repay the Federal Reserve Bank of New York. As of October 27, 2010, the principal and interest owed to the New York Fed was approximately $20 billion.
AIG will also make payments on other interests owned by the government. The MetLife securities will be sold over time to provide additional funds to repay the government. The U.S. Treasury Department will remain with a 92.1% stake as agreed in the exit plan.
During the financial crisis, AIG's bets on mortgage-backed securities and other assets went sour and threatened to topple the giant insurance and finance company. Since its near-collapse in September 2008, AIG has received a total of $182.3 billion in bailout funds. But recently, AIG has been selling off assets to strengthen its financial position, repay the government and regain its independence.
"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," said CEO Robert Benmosche, who has recently disclosed he was being treated for cancer.
Benmosche added, "As we said on September 30, AIG will restructure itself around its core property casualty and life and retirement services businesses, which are performing well, and will provide our company with a strong foundation to build value for all stakeholders going forward."