As part of its effort to repay the bailout money it received last year when it was at the edge of collapse, American International Group Inc. (AIG) will sell its Canadian mortgage insurance business to a private investor group of the Ontario Teachers’ Pension Plan. 

With about C$274 million ($263 million) in assets, the AIG United Guaranty Mortgage Insurance Company Canada is the second-largest private mortgage-insurance provider in Canada. The Ontario Teachers’ Pension Plan, the largest single-profession pension plan in Canada, will gain significant mortgage insurance market share through this acquisition as the AIG unit is well positioned to expand its market position in Canada where mortgage insurance business is expected to grow significantly. 

AIG received federal support worth $182.5 billion, which helped prevent its collapse in Sep 2008. The government now owns nearly 80% of the company. Recently, in a major revelation, CEO, Robert Benmosche disclosed his intention to repay the bailout money to the U.S. government within the next two years. For this, AIG expects to use earnings from business operations and also by disposing unnecessary businesses in the near term. 

As part of its intention to focus on expanding the property and casualty unit, last month, AIG has shelved its effort to spin off its property-casualty business Chartis. 

However, the CEO is planning an organization-wide restructuring instead of divesting assets and units to pay back the government money. We don’t think the Canadian mortgage division was a core business for AIG. 

However, the concerns that need attention along with the repayment of government money are an improvement in overall managerial efficiency, inspired confidence among the dispirited staff and withstanding consistent pressure from the U.S. government to sell assets quickly to repay debt. These issues have to be dealt with head-on immediately to help revive AIG. 

On Tuesday, the shares of AIG closed at $29.33 on the New York Stock Exchange, down 1.9% from last day’s closing price.
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