American International Group Inc. should have a list of assets it wants to sell by next week, its new chief executive said Monday, as the company prepares to split itself up to repay an emergency bailout loan.
The New York-based financial titan, which was once the world’s most valuable insurer, needs to raise cash quickly to repay an $85 billion U.S. Federal Reserve loan that allowed it to avoid bankruptcy after taking massive losses on mortgage derivatives.
“We’re going to take those assets which are probably very valuable, but can also be digested by buyers in relatively manageable bites, and we will simply start to market them,” Edward Liddy, who was appointed AIG’s chief executive last week, said in an interview on the CNBC financial news channel.
“I hope within the next seven to 10 days to be out there with a plan that lists everything that’s for sale and maybe even execute some of those transactions by then,” said Liddy, a former CEO of insurer Allstate Corp.
He said he hoped AIG would be able to pay back the Federal Reserve loan “as quickly as possible.” If the loan is not repaid, the U.S. government has the right to take an almost 80 percent stake in the company.
Liddy, who was named AIG’s chief last Thursday as part of the Federal Reserve deal, did not identify which of AIG’s many operating units might be up for sale.
Its aircraft leasing unit, International Lease Finance Corp., and its large U.S. life insurance and annuity arm American General, which it bought in 2001, could be top of the list, analysts said.
AIG would be a smaller firm after the expected asset sales, focusing on its traditional strengths in property-casualty insurance and its international business, especially in Asia, said Liddy in the CNBC interview.
“It will look a lot like it did prior to 1998, 1999, with less reliance on the financial services side,” said Liddy.
Reports Monday said a group of large AIG shareholders, possibly including former CEO Maurice “Hank” Greenberg, were looking at ways of repaying the loan quickly by organizing asset sales or raising capital.
Liddy said that was not a likely outcome and he did not expect to make a deal with Greenberg.
AIG shares jumped 22.6 percent Monday, helped by reports that the shareholder group may be able to plot a way to prevent AIG from falling into the government’s clutches, and some optimism that AIG may ultimately emerge as a strong company, if it can execute asset sales.
“It’s a soft market in the insurance industry right now, so a lot of people would give their eye tooth to own (parts of AIG),” said Andrew Barile, an independent insurance consultant, based in Rancho Santa Fe, California. He said the sum of all the parts of AIG, which underwrites almost every type of insurance in markets around the world, could be worth as much as $180 billion.
Shares of rival insurers, such as Chubb Corp. and XL Capital Ltd, fell sharply. The stocks had run up in recent days on hopes they would win business as policyholders switch away from an uncertain AIG.
Allstate would be a natural contender to buy AIG’s U.S. personal auto insurance unit, said Barile, which would make Allstate the country’s largest auto insurer, surpassing giant mutual State Farm. Liddy, appointed to oversee the sale process, was CEO of Allstate from 1999 to 2006.
If AIG can repay the loan from the proceeds of asset sales and retain an operating base, shareholders would fare better than if the Federal reserve took up its 80 percent stake, which would dilute existing shareholders’ stake.
“Maybe people are speculating that there will be some value in the business going forward,” said Bobby Harrington, head of block trading at UBS in Stamford, Connecticut. “They’d pay back the government, and the company would still have some businesses that are strong.”
(Reporting by Bill Rigby and Christian Plumb; Editing by Andre Grenon, Gary Hill)
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