American International Group Inc. posted the biggest gain in the 81-company Standard & Poor’s 500 Financials Index after Deutsche Bank AG said the insurer may repurchase $20 billion of stock in the next 12 months.
The bailed-out insurer jumped 2.1 percent to $29.67 at 4:08 p.m. in New York after advancing 2.8 percent yesterday.
Chief Executive Officer Robert Benmosche is repurchasing stock from the government to help the company regain independence from its 2008 rescue and improve return on equity. New York-based AIG repurchased $3 billion of stock from the Treasury Department on March 8 at $29 a share as the department sold the same amount at that price in an offering to investors, cutting the U.S. stake to about 70 percent.
“AIG is likely to buy back far more of its own shares than the market price would indicate, and we believe those share buybacks happen at a pace that is far faster than currently anticipated,” Joshua Shanker, an analyst at Deutsche Bank, said in a note yesterday. “We believe $15-20 billion (or even more) worth of buybacks over the next 12 months is achievable.”
Shanker said AIG may generate funds through distributions from subsidiaries and additional asset sales, including the lowering of a stake in Hong Kong-based insurer AIA Group Ltd. He said he met last week with AIG managers including Chief Financial Officer David Herzog.
The U.S. needs to average at least $28.72 on its share sales to recoup taxpayer funds. Mark Herr, a spokesman for the company, didn’t immediately return a message seeking comment.