American International Group Inc. has moved closer to repaying the federal government by completing the sale of American Life Insurance Company to MetLife Inc.
AIG, New York (NYSE:AIG), sold American Life Insurance Company (ALICO) to MetLife, New York (NYSE:MET), for about $16 billion, including $7.2 billion in cash and about $8.8 billion in MetLife stock and other securities. Because of an adjustment provision in the purchase agreement, the final price was about $400 million higher than the companies had previously estimated.
AIG also has raised about $20.5 billion by selling a large stake in American International Assurance Company Ltd. (AIA), Hong Kong, a major Asian life insurer, through an initial public offering (IPO).
AIG now has a total of about $37 billion in cash and securities it can use to pay the U.S. Treasury Department and the Federal Reserve Bank of New York for emergency support supplied during the 2008 financial crisis, when a real estate slump suddenly made mortgages at the heart of arrangements backed by a financial products unit of AIG appear to be toxic.
AIG says it will sell the MetLife securities over time, subject to lock-up provisions and market conditions.
AIG will be using the cash to implement an AIG recapitalization plan unveiled Sept. 30.
To carry out the restructuring, AIG hopes to draw up to $22 billion in Troubled Asset Relief Program (TARP) funds from the Treasury Department to buy the New York Fed’s preferred interests in the special purpose vehicles holding AIA and ALICO. The Treasury Department will get the interests. After the restructuring, the
U.S. Treasury says, it will own the equivalent of 92.1% of AIG’s common stock, or about 1.7 billion shares.