NEW YORK — American International Group chief executive officer Robert Benmosche says the insurer is becoming less reliant on U.S. aid as it sells units, borrows from debt markets and strengthens operations it intends to keep.
The bailed-out insurer is "now on a path" to repaying the loans included in its $182.3 billion rescue package, Benmosche said in an interview Thursday. The company will first pay off the $25.3 billion it owes the Federal Reserve before deciding how to raise the cash it needs to end its separate arrangement with the Treasury that includes a draw on a second credit line of more than $40 billion.
AIG reached agreements to sell its international life-insurance units for more than $50 billion in the first quarter, and its plane-leasing arm issued unsecured debt for the first time since May 2008. Standard & Poor's said Thursday results were improving at AIG's remaining units and that the insurer may recover from the junk status assigned to its stand-alone credit by yearend.
"We are well on our way to paying back the Federal Reserve" with the sales of American Life Insurance and AIA Group to MetLife and Prudential, Benmosche said. "We are beginning to show the appropriate returns you'd expect of a company of our stature."
Chartis, AIG's U.S. and overseas property-casualty unit, competes against Travelers and Ace Ltd., and has been able to retain clients amid the federal bailout, Benmosche said. About 75 percent of insurance buyers using AIG said they planned to stay with the insurer compared with 41 percent six months earlier, Jay Gelb, a Barclays analyst in New York, said in a Dec. 14 research note.
"Client retention has gotten much better," Benmosche said in the interview. "Employee retention has gotten much better."
Benmosche cited Citigroup's conversion of preferred to common shares as one possible strategy AIG could use. The Treasury will dispose of its 7.7 billion common shares of New York-based Citigroup over the course of 2010 using a "prearranged written trading plan," the agency said this week. It also holds AIG preferred shares.
AIG's more immediate focus is on completing the sales of the life insurance units, increasing profits at its remaining businesses and improving operating returns, Benmosche said. The sales of the life units will close by yearend, the companies have said.
"Then, we've got to begin to look at what are the alternatives we have to raise sufficient money so that we can pay back the TARP," he said. "Let's get 2010 done, get the transactions done, decide what we need to sell in terms of the securities we are taking on and then we get to discuss what is the best way for Treasury to be paid back in full."
AIG needed the bailout in 2008 after losses on bets tied to home loans. When Benmosche took over in August 2009, he said he wouldn't be rushed into selling assets at unfavorable prices. Still, AIG has reduced bets in the derivatives business blamed for pushing the insurer to the brink of collapse and said its Financial Products subsidiary would be closed by yearend with as much as $400 billion in bets retained.
"We wanted to sell from a position of strength instead of a position of weakness," Benmosche said. "We got the operating performance where we wanted."