Investors hope to recoup funds with AIG arm stake sale plan

Written by Reuters | New York | Updated: Jan 28 2010, 04:21am hrs
AIGs talks to sell its foreign life insurance business offer the hope that US taxpayers might recoup their investment in the bailed-out insurer, but it is far from getting off federal life support.

American International Group Inc, which is trying to pay back the government after being propped up by a $182.3 billion aid package, is in talks to sell its American Life Insurance Co (Alico) unit to MetLife Inc for between $14 billion and $15 billion. The Federal Reserve Bank of New York would get $9 billion of the proceeds because of its preferred interest in the business, leaving AIG with several billion dollars that it could use to pay some of what it owes the government.

Selling Alico would also signal a pickup in the market for insurance sector deals, which bodes well for other AIG asset divestitures, like the planned initial public offering for American International Assurance (AIA), analysts said. AIA, its Asian life insurance unit, might go public in the first half of 2010 in Hong Kong. That offering could fetch more than $10 billion. The Fed has a preferred interest worth $16 billion in a special vehicle that holds AIA. But AIG, as of December 1, still owed US taxpayers $17.2 billion under a Fed credit facility and $44.8 billion in equity injections from the US treasury that it must pay back. The US government also owns nearly 80% of AIG.