American International Group Inc. is seeing its plans to free itself of government support start to come together two years after it was bailed out and expects taxpayers to profit from their investment.
AIG is close to finalizing a plan for the government to sell its stake in the insurer, which would see the Treasury Department convert $49 billion of preferred stake into common shares to be sold over time, Chairman Steve Miller said on Wednesday.
AIG also is close a deal to sell two life insurance units in Japan to Prudential Financial Inc for about $4.8 billion in cash, a source familiar with the matter said.
The developments show AIG is making significant progress in disentangling itself from the government, although it still has a long way to go before the taxpayers get paid back in full for their $182.3 billion rescue package.
An announcement of the repayment plan, which another source said could come within days, would also mark a big win for the government at a crucial time. The $700 billion Troubled Asset Relief Program, or TARP, set up amid the 2008 financial crisis expires on Sunday and the United States is set to go to polls for mid-term elections in November.
AIG has not drawn on all the assistance and needs to pay back around $100 billion, with the money going to the Federal Reserve Bank of New York and the Treasury. The government also owns nearly 80 percent of AIG.
"We want to get the total to zero," Miller told reporters on the sidelines of a conference. "If we are successful and do as well as we hope then actually the government would have walked away with a big profit."
AIG shares were up 1.4 percent at $37.83 on the New York Stock Exchange on Wednesday afternoon.
The insurer’s board is meeting later on Wednesday to discuss the exit plan, Miller said at the Dow Jones Private Equity Analyst conference in New York.
Miller, a corporate turnaround specialist who took over as chairman of the company in July, said that talks with the government were nearing a conclusion that could be a "win-win" deal for stakeholders.
But he pointed to complexity of negotiations, saying the plan had to work for several different parties like the Treasury, the Fed, the trust that holds the Treasury’s stake as well as the ratings agencies.
"We are talking to several different parties in the government. And we are working off documents that were created with care but with haste two years ago when the world was falling apart," Miller said.
AIG is restructuring its business such that domestic life general insurance operations form the core of the company.
Miller said the exit plan will give AIG the ability to issue new debt.
