NEW YORK (Bloomberg)—American International Group Inc. surged the most in six months after announcing a deal that provides for repayment of the Federal Reserve and sets the rules for its eventual exit from U.S. control.
AIG jumped $3.80, or 9%, to $46.02 at 12:11 p.m. in New York Stock Exchange composite trading, its highest price in more than a year. The company was the third-biggest gainer in the Standard & Poor’s 500 Index.
Chief Executive Officer Robert Benmosche is seeking to retire a U.S. bailout that ballooned to $182.3 billion last year under his predecessor Edward Liddy. He will use proceeds from the sales of two non-U.S. life insurers to close a Fed credit line. He’s counting on profits at AIG’s global property/casualty coverage and U.S. life units to entice private investors to replace the equity capital provided by the Treasury Department.
“I believe very strongly in the core fundamentals of the firm,” said Jonathan Hatcher, a Jefferies Group Inc. analyst. “Maybe there was some uncertainty about how the U.S. government exit plan was going to work, and I think we know a lot more about it today than we did yesterday.”
Treasury, which invested about $49 billion in New York- based AIG, plans to convert its preferred stake into 1.66 billion shares of common stock, or 92% of the total, by March 15, according to statements from the department and the insurer late yesterday. The securities will then be sold to private investors.
Treasury expects underwriters to be selected by early next year for an offering of some of its stake and will determine how many shares to sell based on market conditions, according to a person familiar with the plan.
AIG has advanced about 54% this year after falling 4.5% in 2009 and plunging 97% in 2008.