U.S. Treasury to sell off $18B of AIG shares

September 10, 2012 12:30PM

The U.S. Treasury Department is set to sell off $18 billion worth of shares in insurance giant American International Group, thus losing the majority stake it acquired during the bailout, Bloomberg News reported.

AIG, which held or guaranteed tens of billions of dollars in mortgage-based assets, was bailed out by the U.S. Federal Reserve Bank after shares in the company plummeted 98 percent over the five years following 2008 due to the collapse of the housing market.

Of the $18 billion worth of shares being sold, $13 billion will go to private investors while AIG will attempt to repurchase the remaining $5 billion worth of its shares. The sale will leave the U.S. government with a 23 percent stake in the company. The insurer will continue to be regulated by the Federal Reserve as a savings and loan holding firm.

AIG shares fell 62 cents to $33.37 this morning, following the announcement, after gaining nearly half its share value back over the last year. The Treasury’s announcement has led to the largest (1.8 percent) decline in the 22-company Standard and Poor’s 500 Insurance Index.

“This is a very large amount of shares to send to the public at once,” Paul Newsome, an analyst at Sandler O’Neill & Partners, told the Wall Street Journal. “Whenever you see a lot of shares come on the market, you typically expect shares to trade down.” [Bloomberg]— Christopher Cameron