American International Group has declared its first dividend since its 2008 federal bailout, and said it is preparing to spin off its airplane-leasing unit via an initial public offering later this year if the proposed $5.28 billion sale falls through.
"We are continuing to negotiate with the consortium. Keep in mind, we don't have a buyer, we have a group," Robert H. Benmosche, president and chief executive officer of AIG, said about the proposed sale during the company's second-quarter earnings call. AIG posted a 17.4% jump in second-quarter net income, citing in part underwriting improvements.
In June, AIG postponed the $5.28 billion sale of International Lease Finance Corp. for a second time after the buyer, an investor group, failed to make a transaction payment.
The transaction, which was announced in December, was originally scheduled to close May 15. The investor group that intends to acquire ILFC is led by Weng Xianding, chairman of New China Trust Co. Ltd., and its members include New China Trust Co. Ltd., China Aviation Industrial Fund and P3 Investments Ltd. The group has agreed to acquire 80.1% of ILFC for about $4.23 billion, with an option to acquire an additional 9.9% stake.
"We did not receive the money on time, and now both sides are working on whether and how we continue...we are focused on an IPO at this stage in the game. If they can come together and the money comes in, then we will proceed. If not, we will prepare ourselves later this year for an IPO," Benmosche said.
The company posted net income of $2.7 billion and after-tax operating income of $1.7 billion. "It was another strong quarter for AIG," Benmosche said.
Highlights from the quarter include a 3.8% increase in commercial insurance rates, including a 7.3% increase in the U.S., which was lead by U.S. casualty, which increased by 9.4%, and U.S. property, which rose by 5.7%.
The global combined ratio for the calendar year rose slightly to 102.6 from 102.4 for the same quarter last year.
The quarterly dividend is 10 cents a share.
Benmosche said federal regulators were aware of the dividend, but are not in a position to approve it. He said the company often speaks to federal regulators and strives for transparency, and that regulators are "aware of everything we are doing of any consequence."
"People are asking if the Fed approved it. The Fed does not approve these things," Benmosche said during the call. What is key, he said, is the rating agencies. "That's where we go. If the rating agencies said 'we're having some concerns with what you are doing,' I can assure you, we would not have done it," Benmosche said.
In July, AIG said it plans to merge its two nonlife units in Japan. AIG Japan Holdings KK, American International Group Inc.'s Japanese operation, said it will merge AIU Insurance Co. Ltd. and Fuji Fire and Marine Insurance Co. Ltd., in the second half of 2015.
AIG was in danger of failing in September 2008 when the federal government stepped in to provide the insurer with an emergency loan. The available bailout grew as high as $182 billion, but AIG said it never borrowed the full amount it was offered. AIG sold non-core assets to pay back what it owed to the federal government.
AIG's subsidiaries currently have Best's Financial Strength Ratings of A (Excellent). At midday Aug. 2, shares of AIG were trading at a 52-week high, $47.99 a share, up 1.94% from the previous close.