AIG pays back $4bn of loans from taxpayer
BAILED-OUT insurer American International Group (AIG) said yesterday it paid back nearly $4bn (£3bn) in US loans in its single largest cash payment so far to reduce its debt to taxpayers.
The payment reduces the size of the Federal Reserve Bank of New York’s credit facility by that amount to about $30bn. The outstanding principal balance, excluding fees and interest, is now at just over $15bn.
At $15bn, the balance is at its lowest level since the March 2009 restructuring of government aid
A previous low of $17bn was reached in December after AIG gave the Fed preferred interest in two special purpose vehicles created to hold its foreign life insurance business.
AIG, which is nearly 80 per cent owned by the US government, was rescued in September 2008. Besides the Fed credit facility, the US Treasury Department holds about $49bn in preferred shares that AIG must repay.
The Fed repayment comes after International Lease Finance, AIG’s aircraft leasing unit, sold $4.4bn in debt to investors and used the bulk of the proceeds to repay $3.9bn in government loans.
“This is continuing tangible evidence of AIG’s progress in repaying the American taxpayers,” said AIG president and chief executive Robert Benmosche. “AIG is getting stronger every day. We still have more work to do, but we will finish the job and make sure we repay the American taxpayers.”
Benmosche also said AIG’s insurance businesses were profitable, with client retention rates and surrender rates stabilising to normal levels. “We are starting to see the light at the end of the tunnel,” he said.
AIG said it will book a pre-tax charge of about $650m against its earnings due to the repayment.
In June, a Congressional Oversight Panel said it was unclear whether taxpayers will ever fully recoup the full $182bn they plowed into AIG.