Treasury launches $18 billion AIG stock offering

NEW YORK, Mon Sep 10, 2012 – The U.S. Treasury Department said it will sell most of its stake in insurer American International Group Inc., making the government a minority investor for the first time since it rescued the company in the depths of the financial crisis four years ago.

While the Treasury was universally expected to sell stock this month, the magnitude of the planned $18 billion offering was a surprise that will take the government stake in what had been the world’s largest insurer to around 20 percent from 53 percent currently.

The sale announced on Sunday will trigger a number of changes for AIG, the most important of which is that it will now fall under Federal Reserve regulation as a savings and loan holding company since the company owns a small bank. The Treasury will also lose the ability to dictate the terms of further stock sales.

AIG said it would buy up to $5 billion of the offering. Last week the company sold part of its stake in the Asian insurer AIA to help fund that buyback.

A number of analysts who follow AIG said at the time they were disappointed the company was not buying back more shares, although they also assumed the eventual government offering would be much smaller than it has turned out to be.

Barclays Capital, in a research note Friday, said investors were likely to be disappointed if the government was not out of the stock by the November election.