US Treasury to make $22.7-bn profit from AIG stake sale

The US Treasury department said yesterday that it has agreed to sell all of its remaining shares in global insurance giant American International Group Inc (AIG), which will result in a cumulative profit of $22.7 billion.

The last lot of 234 million common AIG shares representing around 16-per cent stake in the company, at an agreed price of $32.50 per share, is expected to fetch approximately $7.6 billion.

''To date, giving effect to the offering, Treasury has realised a positive return of $5 billion and the Federal Reserve has realised a positive return of $17.7 billion,'' the Treasury said in a statement.

The New York-based AIG almost collapsed at the height of the global financial crisis as it suffered huge losses due to its massive exposure to subprime mortgage securities. The US government bailed out the beleaguered insurance giant in 2008 for around $182 billion (see: AIG says $182 billion bailout not enough, wants more).

The Federal Reserve gathered $130.2 billion or about 16-per cent gain on its investment of $112.5 billion, while the treasury collected $74.8 billion, making a profit of 7 per cent on its $69.8 billion.

The Treasury will still continue to hold warrants to purchase approximately 2.7 million shares of AIG, the sale of which could further increase the government's profit.