AIG: The End of an Era
The 2008 bailout of American International Group (NYSE:AIG), which cost $182 billion, will result in a profit of $22.7 billion for American taxpayers. As Reuters reported on Tuesday, the Treasury is selling its final 234.2 million shares of AIG common stock for $32.50 per share, with the expectation that the sale will raise $7.6 billion.
What Changes Has AIG Undergone in the Last Four Years?
Four years ago, the New York-based insurer was taken over by the U.S. government as a measure to prevent global economic collapse. “The U.S. owned as much as 92 percent of AIG after saving a firm that insured 100,000 municipalities, retirement plans and companies and was counterparty to some of the biggest banks,” reported Bloomberg. Yet the AIG bailout had many detractors. “Federal Reserve Chairman Ben S. Bernanke has said saving AIG after it was hobbled by mortgage-related bets made him ‘more angry’ than any other measure the government undertook to counter the deepest financial crisis since the Great Depression,” stated the publication.
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However, since the bailout, AIG has sold more than $65 million of assets to pay for the rescue, and Chief Executive Officer Robert Benmosche has limited the derivative bets that almost brought down the firm. AIG has proven to be a much more stable company than it was four years ago; the insurer has reported four straight quarters of profits and plans to reinstate a dividend in 2013, if regulators approve.
CHEAT SHEET Analysis: Is this a Positive Catalyst for AIG’s Stock?
One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’ stock. Following the Treasury Department’s announcement, shares of AIG rose 5.7 percent to finish the trading at $35.26. The government’s decisions to sell its last remaining stake in the insurer indicated that AIG’s crisis has fully come to an end, and the company’s stock responded to that news.
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