The U.S. Treasury Department has sold off its remaining shares of American International Group (NYSE: AIG), acquired in a financial crisis bailout move.
The Treasury had 234.17 million shares left, or roughly 16% of the insurance giant's outstanding stock.
After unburdening itself from its mountainous holding, the Treasury will only own warrants to purchase additional shares of AIG.
Monday's stock sale announcement follows the department's September sale of about 554 million shares to the public at $32.50 per share. That liquidation marked the end of the Treasury's majority ownership in the firm.
This final stock sale is good news for AIG and its shareholders - and U.S. taxpayers.
"The closing of this transaction will mark the full resolution of America's financial support of AIG-with a profit to taxpayers of $22.7 billion to date. It marks on of the most extraordinary-and what many believed to be the most unlikely turnaround in American business history. And you did it," AIG CEO Robert Benmosche penned in a company email to employees on Tuesday.
After the news, Sterne, Agee & Leach, who give AIG a "Buy" rating, said the sale was good for investors.
"With the U.S. Treasury now out of the stock and AIG once again a 100% privately held company, we expect management will be able to turn its full attention to managing the company to drive improved financial performance and higher return on equity," wrote analysts.
AIG Stock Rebound (NYSE: AIG)
If past performance is a guide, the government's final AIG stock sale will indeed boost the share price. During previous government sales, the stock held steady and subsequently rose.
Year-to-date, shares of AIG have soared 44%, allowing the government to completely exit its $182 billion bailout earlier than forecast.
Much of the credit goes to new CEO Benmosche, who has taken the company from an over-leveraged business to a more streamlined life insurance provider.
AIG has shown a profit for the last three quarters, but with much of that money coming from recent asset sales, it's difficult to get a clear read on actual revenue.
Plus, a main reason for its profitability comes from generous tax breaks. In Q4 of 2011, AIG received a whopping $17.7 billion tax benefit from the government, paid no corporate taxes, and actually got a refund from the IRS.
AIG Stock Sale History
The Treasury began dumping AIG stock in early 2011.
This August, the Federal Reserve Bank of New York sold the last of the asset-backed securities it obtained from AIG as part of the bailout package. The Fed pocketed a $17.7 billion profit for its part in the thorny bailout.
In a statement Tuesday, the Treasury Department said, "Since the financial crisis, AIG has undertaken a dramatic restructuring effort, which put it in a stronger position to repay taxpayers. The size of the company has been cut nearly in half as it sold non-core assets and focused on its core insurance operations."
AIG Stock Price History
Yet despite the hefty profit that is being returned to the government, bailout actions are still controversial among taxpayers.
James Millstein, a former Treasury official who supervised AIG's restructuring from 2009-2011 said, "No taxpayer should be pleased that the government had to rescue this company, but all taxpayers should be pleased with (the) announcement, ending the largest of the government's financial industry bailouts with a profit to the Treasury Department," the Los Angeles Times reported.
AIG investors appear more forgiving and pleased.
Related Articles and News:
- Money Morning:
Investing in Gold: What to Expect from Prices Before 2013
- Money Morning:
The Fiscal Cliff Is Set To Clobber The Middle Class With Nearly 50% Tax Rates
- Money Morning:
Tax Fight Remains Biggest Roadblock in Fiscal Cliff Deal
- The Wall Street Journal:
AIG's Benmosche Thanks American Taxpayers For, You Know, Everything
- Los Angeles Times:
Sale of last AIG shares brings U.S. bailout profit to $22.7 billion
- USA Today:
Treasury sells AIG stake for $22.7 billion profit