AIG repays US Government bailout debt

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18 June 2012

US global insurance giant AIG has paid back $US39 billion ($38.65 billion) in debt to the US Federal Reserve.

The debt was incurred during AIG’s bailout by the US central bank in September 2008.

The repayment was financed by sales of AIG mortgage debt by the Federal Reserve on the open market as part of its strategy to unwind the risk assets it took on in financial sector bailouts during the global financial crisis.

The Fed also took $US62.1 billion ($61.5 billion) in AIG collateralised debt obligations during the bailout. As these are sold AIG is expected to receive a $US5 billion ($4.95 billion) payout.

The US Treasury still owns 60% of AIG worth about $US30 billion ($29.7 billion) after selling down from 92% in three steps which raised $US17 billion ($16.8 billion).

Analysts say the US Treasury will need to get $US28.72 ($28.43) a share to break even. AIG shares have been trading recently around $US31 ($30.69), leaving the possibility for the insurer to return to private ownership soon.

Prior to its 2008 immolation AIG was the world’s largest insurer valued at $US183 billion ($181.2 billion).