Today Treasury announced that they will be selling $6 Billion of AIG stock, and AIG announced that they will be buying up to $3 Billion of it. This is enormously accretive to AIG shareholders being that if AIG were to pay $29 a share from Treasury, they would be purchasing their own stock at 52% of their book value of $55. AIG’s core operating businesses are performing better after some painful increases to their reserves in their Chartis unit last year. This announcement follows the recent news that AIG is divesting a portion of their stake in the Asian insurer AIG to pay back the rest of their loan from Treasury.
I’ve been very impressed with the management of Robert Benmosche who is battling cancer, while rebuilding this formerly great insurance, after a period of horrendous management and risk controls. Because of AIG’s size and the massive government investment there is a great deal of uncertainty as to their capital requirements which I believe is an overhang on the stock. To see that they are being allowed to buy back $3 Billion of stock after already announcing a $1 Billion buy back last quarter shows that this is a company moving in the right direction. Below is the Bloomberg article referenced: