Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



AIG's Looking Good After Its Recent Payback

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

With its recent repayment of $1.5 billion to the treasury, American International Group (NYSE: AIG  ) now owes an estimated $45 billion to taxpayers. Amid the financial crisis in 2008, the insurer had to be bailed out for a staggering $182 billion. Kudos to AIG for repaying three-quarters of that amount in just a few years.

So is all good now? I do think it's pulling itself out of a hole, and it's time we took stock.

Non-core asset sales
In a bid to repay the government, AIG has gotten rid of more than $50 billion of its assets. The company has been on a rampage more recently when it comes to disposing of non-core assets, in an attempt to help generate cash both to repay the bailout money and beef up its capital ratios.

Earlier this year, the insurer sold a $500 million stake in Blackstone Group and is set to raise $6 billion by selling its stake in its overseas life-insurance subsidiary AIA. It currently holds a 32.8% stake in AIA after having sold two-thirds of its stake in 2010 by means of a whopping $20.5 billion IPO in Hong Kong.

In fact, last year, the American insurer made serious strides in repaying Uncle Sam. It generated $2.16 billion from the sale of its Taiwanese unit Nan Shan Life Insurance and $15.5 billion by selling its insurance wing, American Life Insurance, better known as Alico, to fellow insurer MetLife (NYSE: MET  ) -- incidentally, one of the four banks to fail the recent round of Federal Reserve stress tests. GE Capital, the financial-service unit of General Electric (NYSE: GE  ) ,is set to acquire MetLife's banking business at the end of the second quarter.      

Rolling up the TARP
The rush to sell assets makes sense, with the Treasury making efforts to wind down the Troubled Asset Relief Program (TARP). The Fed currently holds $47 billion worth of AIG's toxic assets, which it had acquired as part of the bailout. Now, the Fed has put these assets on the auction block. In February, Goldman Sachs (NYSE: GS  ) acquired AIG's mortgage bonds worth $6.2 billion. That follows the sale of $7 billion worth of mortgage bonds to Credit Suisse (NYSE: CS  ) in January. The sale of these assets will help the central bank repay Maiden Lane II. Other bidders for these toxic assets included Morgan Stanley and Barclays, but Goldman outbid both to buy AIG's mortgage-backed assets.

Banks now want more of AIG's toxic CDOs. In a way, that would be good. It would help AIG get rid of its troubled assets and also help reduce the amount it owes the government.

Apart from reducing its ties with the government, the repayment has a positive effect on the insurer. In the words of Sandler O'Neill & Partners analyst, Paul Newsome the repayment is "going to reduce the complexity of the balance sheet ... as well as reduce the complexity of the company in general."

AIG posted profits in the most recent year, and once the TARP debt is finally off its balance sheet, it will be in even better shape. I'm putting AIG on my Watchlist, and you can follow the company, too -- simply add the stock to your free Watchlist.

And if AIG and its fellow insurers are not for you, find out about some delightfully straightforward bank stocks, including one Warren Buffett could have loved in his earlier years, in our free report, "The Stocks Only the Smartest Investors Are Buying." Download your copy while it's still available.    

Fool contributor Shubh Datta doesn't own shares in the companies listed above. Motley Fool newsletter services have recommended buying shares of Goldman Sachs. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1856845, ~/Articles/ArticleHandler.aspx, 10/27/2016 5:04:05 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,169.68 -29.65 -0.16%
S&P 500 2,133.04 -6.39 -0.30%
NASD 5,215.97 -34.29 -0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 4:00 PM
AIG $61.42 Up +0.31 +0.51%
American Internati… CAPS Rating: ****
CS $14.14 Up +0.25 +1.80%
Credit Suisse Grou… CAPS Rating: ***
GE $28.63 Down -0.24 -0.83%
General Electric CAPS Rating: ****
GS $177.75 Up +0.68 +0.38%
Goldman Sachs CAPS Rating: ***
MET $47.69 Up +0.79 +1.68%
MetLife CAPS Rating: *****