American International Group has been an aggressive purchaser of securities it formerly owned that were held in facilities created by the Federal Reserve Bank of New York.
During its conference call with analysts Friday, AIG officials said the company has purchased a total of $9.9 billion of securities held in the Maiden Lane II and III portfolios.
Robert Benmosche, AIG president and CEO, and David Herzog, chief financial officer, said AIG has participated in most of the 12 auctions the Fed bank has used to sell the securities and that it has purchased $7.1 billion of those securities in auctions held in July.
The average yield of the bonds was 9.7%, according to the PowerPoint displayed during the conference call.
“We feel these are very good for this company on the yield basis going forward, especially in this lower interest rate environment,” Herzog said.
The Fed bank has said the securities sold in July were bought for an average 56 percent of face value.
Herzog said AIG was a winning bidder at a third of the auctions and that demand for the bonds are aggressive.
Securities held in the Maiden Lane II facilities were mortgage-backed securities originally owned by AIG’s life insurance subsidiaries.
This facility was closed out in April.
Amongst the securities held in this portfolio were $600 million in the first tranche of mortgage-backed securities issued by Freddie Mac, Benmosche and Herzog said.
Maiden Lane III originally contained $62 billion in face value of collateralized debt obligations (CDO) backed by mortgage-backed securities of various grades.