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AIG Prices Reinsurer Shares in $988 Million Offering

Posted on 05 Jun 2009

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American International Group Inc. (AIG), the insurer selling most of its stock in reinsurer Transatlantic Holdings Inc. to repay a federal bailout, raised about $988 million in the public offering.

AIG priced the 26-million share offering at $38 apiece, the New York-based insurer said late yesterday in a statement, which is 7.3 percent less than Transatlantic’s $41 closing price on the New York Stock Exchange yesterday. AIG held about 39 million shares, or 59 percent of Transatlantic, before the offering.

“It’s a step in the right direction,” Bill Bergman, an analyst at Morningstar Inc. in Chicago, said in an interview. “Things are getting better in the capital markets and the outlook for selling some of their subsidiaries is improving.”

AIG was forced to scale back plans to sell units in their entirety as the recession eroded the value of insurance assets and made financing costlier for potential buyers. The company, which is seeking to repay loans within a government bailout valued at $182.5 billion, previously disclosed deals for $5.6 billion and said in March it will place two non-U.S. life insurers into trusts for eventual public offerings or sales.

AIG’s plan to reduce its stake was a “very positive event” for Transatlantic, said Steven Skalicky, the chief financial officer of the reinsurer, in a May 28 interview. Mutual funds that previously shunned the stock because of AIG’s ownership may now be willing to buy shares, he said. Skalicky didn’t immediately return a call for comment today.

Transatlantic is the second-largest U.S.-based reinsurer behind Warren Buffett’s Berkshire Hathaway Inc. The New York- based reinsurer’s first-quarter net income fell 35 percent to $75.2 million on the declining value of investments, Transatlantic said in April.