AIG Sees $490M on Stake Sale - Analyst Blog

American International Group Inc.’s (AIG) expects $490 million from its stake sale in the reinsurance company Transatlantic Holdings Inc. (TRH).

Last Friday, the company announced its plan to sell its remaining 14% stake in Transatlantic owned by American Home Assurance Company (AHAC), an AIG subsidiary.

Last Tuesday, the offering of 8,466,693 shares of Transatlantic’s common stock was priced at $53.35 each. The underwriters of the offering include Goldman Sachs Group Inc. (GS), Wells Fargo Securities of Wells Fargo & Company (WFC) and BofA Merrill Lynch, a part of Bank of America (BAC). They have a 30-day option to purchase up to an additional 725,969 shares of Transatlantic common stock from AHAC.

In total, the offering would generate proceeds of around $490 million for AIG. Last year, AIG raised over a billion from selling a part of its Transatlantic stake.

AIG, which received federal support worth $182.5 billion, has been trying for the past several quarters to sell assets and streamline its operations in an effort to repay the bailout money.

The company has already fetched two deals in March. It will sell its American Life Insurance Co. (ALICO) unit for about $15.5 billion to MetLife Inc. (MET). MetLife will pay $6.8 billion in cash and approximately $8.7 billion in MetLife equity securities, subject to closing adjustments.

Last week, the company also announced the sale of its Asian life-insurance unit, American International Assurance (AIA) to the U.K.’s Prudential Plc (PUK) for about $35.5 billion.

With the improvement in the capital market, AIG is expected to experience a recovery in the value of its investments. However, the soft insurance market continues to pose a significant challenge for the company’s core property/casualty operating subsidiaries.

Though the company stands to benefit from its scale of operations and the equity market appreciation, we remain concerned about its significant exposure to risky assets.