MET MetLife Inc

Yesterday, American International Group Inc. (AIG) paid $2.15 billion to the U.S. Treasury Department towards part-repayment of the $182 billion it had received from the U.S. Government under the bailout package during the 2008 financial crisis.

The payment was made out of the sale proceeds of the company’s Taiwan-based life insurance subsidiary Nan Shan Life Insurance Company Shan to Ruen Chen Investment Holding Co. AIG has been trying to sell Nan Shan since mid-2009 when the Taiwanese Government rejected its sale to Primus Financial, AIG’s first choice, citing weak financials.

The repayment has reduced the amount AIG now owes to the U.S. Treasury Department to about $51 billion, 77% of which is held as equity in AIG and the remaining 23% is held as preference shares in AIA, a subsidiary of AIG. AIG is expected to sell a part of its airplane leasing subsidiary International Lease Finance Corp. (“ILFC”) to repay a portion of the outstanding bailout money.

AIG is under pressure to repay the bailout money and has been selling its assets over the past two years to raise money for making payments to the Government. Earlier this year it had sold six multi-family complexes in New Jersey to Vantage Properties LLC and Angelo, Gordon & Co. for $241.5 million.

In May 2011, the company had sold 100 million shares for $2.9 billion, while the Treasury has sold 200 million shares out of its 92% stake in AIG for $5.8 billion. The treasury is AIG’s largest shareholder with a 77% stake in the company. However, it is expected to sell its entire stake after the expiry of the 120-day lock-in period.

While AIG has repaid a major portion of the bailout amount, a substantial portion is still outstanding. Hence, we can expect the sale of many more assets apart from ILFC in the near future.

AIG’s main competitors are MetLife Inc. (MET) and Prudential Financial Inc. (PRU). On Thursday, the shares of AIG closed at $22.70, down 8.65%, on the New York Stock Exchange.

AIG carries a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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