The U.S. government today said that it will sell $5 billion in AIG shares, one of a series of offerings since the insurance giant received the biggest bailout in history.
The Government Accounting Office said as of March 22, the government still had a $46.3 billion stake in AIG, including unpaid dividends and accrued interest. That’s down from $92.5 billion in March 2011 and $154.7 billion in December 2010. In all, the taxpayers’ ownership in AIG has been cut to 70 percent and this latest sale will bring it to 63 percent.
“Based on the $30.83 closing share price of AIG common stock on March 30, 2012, Treasury could recoup the total value of assistance extended to AIG and take in an additional $2.7 billion including dividends,” the GAO said.
However, it’s not clear how the government could take such a large amount from the insurer any time soon without damaging the value of the shares. The stock fell as much as 7 percent today after the government announced the new share sale.
In 2011, AIG had profit of $18.5 billion but that was mainly because of an income tax benefit. In other words, AIG made a profit because it didn’t have to pony up taxes to the Treasury.
“The indicator on AIG’s quarterly insurance operating performance shows that AIG was profitable in most quarters and that investment income contributed considerably to that profitability, including several quarters when insurance underwriting by itself was not profitable,” the GAO said. “The sustainability of any positive trends in AIG’s operations will depend on how well it manages its business in the current economic environment.”
AIG bought and guaranteed billions worth of mortgages that turned sour in the 2008 financial meltdown. The U.S. acted to bail out the firm after top officials said the entire financial system might collapse if no action was taken.