American International Group Inc. (AIG), the insurer that sold more than $50 billion in assets to repay a U.S. government rescue, is now focused on growth and returning capital to investors, Chairman Steve Miller said.
“We’ve stopped playing defense, we’re back playing offense,” Miller said in an interview airing today on Bloomberg Television, citing a $1 billion stock buyback announced in November. “We have high confidence in the future of this company, and we’re willing to put our money where our mouth is and talk about repurchasing of shares.”
The pace of asset sales at New York-based AIG has slowed since late 2010, when the insurer disclosed a plan to pay back the government. Chief Executive Officer Robert Benmosche, 67, has focused on improving returns at the insurer’s global property-casualty unit and U.S. life and retirement division as he seeks to attract private investors to replace the Treasury Department’s 77 percent stake.
Miller said the strategy could include buying non-U.S. life insurance businesses, including AIA Group Ltd. (1299), the Hong Kong- based company that is one-third owned by AIG. Benmosche sold a majority stake in the Asian company 2010 to help pay back the bailout. AIG also may consider other ways of growing outside the U.S., Miller said.
“When the timing is right we will make the decision to either get out completely or to get back in on AIA,” Miller said in the interview, which was taped this week at the annual M&A Advisor Distressed Investing Summit in Palm Beach, Florida. AIG isn’t “plotting an attack on AIA right now,” he said.
Reacquiring AIA or getting rid of the stake completely could reduce swings in AIG’s quarterly earnings, since the holding is marked to market every three months. AIG posted a $4.11 billion third-quarter loss in November, partly fueled by a $2.3 billion decline in the value of its AIA shares.
The Asian insurer’s stock climbed 8.7 percent in the last three months of 2011 and may add $950 million to AIG’s fourth- quarter results, which will be released later this month, according to an estimate by Adam Klauber, an analyst at William Blair & Co. Reuters reported last week on AIG’s possible interest in increasing its AIA stake, citing Miller.
The insurer has called its plane-leasing unit International Lease Finance Corp. a non-core asset and disclosed plans in September to sell more than 20 percent of the unit in a public offering. Miller said AIG hopes to complete that transaction this year.
AIA shares and ILFC “resulted in significant losses to earnings and book value over the past several years,” Klauber said in a note to clients last week. “A key to the investment thesis for AIG is that these non-core items will not overwhelm the core businesses.” He has a “market perform” rating on the insurer and said it’s a stock to own “over the long term.”
AIG has climbed 13 percent this year through yesterday to $26.31 after slumping 52 percent last year. The insurer trades at about 60 percent of book value, a measure of assets minus liabilities. That ratio motivated the buybacks, Miller said.
“We’re not doing it to try and influence the stock price itself,” he said. “We just happen to think it is a good investment for our own shareholders to buy back shares at the current price levels.”
The Treasury, which sold 200 million shares in May at $29 each, needs to sell stock at about that price to break even on its investment. The department hasn’t said when it will sell more AIG stock.
“Somewhere in the next year or two or three, I don’t know how long it’s going to take, the stock price will become sufficiently attractive that the U.S. Treasury will monetize its interest and the taxpayers will be out and done,” Miller said.
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