NEW YORK (AP) — AIG said Monday it raised nearly $37 billion from the sale of two foreign insurance units and will use that money to repay a government bailout.
The insurance giant closed its previously announced sale of American Life Insurance Co. on Monday. It sold ALICO to MetLife Inc. for $16.2 billion. The sale includes $7.2 billion in cash and $9 billion in MetLife securities.
The closing of the ALICO deal comes just days after AIG completed an initial public offering in Hong Kong for another foreign insurance unit, AIA Group Ltd. The AIA sale raised $20.51 billion in cash.
AIG will use the cash from the two deals to repay one line of aid it received from the government during the financial crisis. It will eventually sell the MetLife securities and use that cash to further pay down its government debt.
Monday’s announcement comes a month after AIG laid out its first detailed plan about how it would repay more than $100 billion in outstanding government aid it received during the financial crisis.
New York-based American International Group Inc. was one of the hardest hit financial companies by the credit crisis and received the largest bailout the government doled out. It received a bailout package enabling it to tap as much as $180 billion in aid. The government received an 80 percent stake in the company as part of the deal.
As part of AIG’s exit plan announced Sept. 30, the U.S. Treasury Department will swap preferred shares it currently holds in AIG for common stock and then sell those shares over time.
The money from the ALICO and AIA sales will completely pay off a credit line it has with the Federal Reserve Bank of New York. As of Oct. 27, the principal and interest owed on the credit line was about $20 billion. The remaining $7.71 billion it raised through the sale will go to pay down other debt AIG owes the government.
AIG has been shedding assets and streamlining operations since it first received a bailout package two years ago. The ALICO and AIA have been, by far, the biggest sales to date.
“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,” Robert Benmosche, AIG’s CEO, said in a statement.
AIG is restructuring itself to focus on its core property casualty and life and retirement services businesses.
The insurance giant was not undone by those traditional business lines, but instead for dealing in the complex derivatives and securities market that got so many financial companies into trouble.
The government stepped in to rescue AIG in 2008 because the insurer worked with hundreds of financial institutions throughout the world. The government believed at the time that a collapse of AIG would further hurt the already fragile credit markets, which had been shaken by the bankruptcy of Lehman Brothers.
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