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AIG chief offers 'hope' something will be left for shareholders

August 20, 2009 | 12:10 pm

Another sign that the bulls aren’t willing to cede control of the stock market: Just a vague hint of encouragement from American International Group’s new chief executive today has sent the bailed-out insurer’s shares flying and helped pull up financial stocks in general.

From Bloomberg News:

Robert Benmosche, named this month as chief executive officer of American International Group Inc., said he expects the bailed out insurer will repay its debts to the U.S.

"At the end of the day, we believe we will be able to pay back the government and we hope we will be able to do something for our shareholders as well," Benmosche said in an interview in Croatia. "The government is working with us. They want us to do things that are very prudent."

He hopes to be able to do something for shareholders? In the same way that most people hope they’ll win Lotto?

AIG’s shares were up $4.74, or 18%, to $31.38 at about 12:10 p.m. PDT. It has the feel of a short-covering rally, which would make sense given that the number of shorted shares jumped from 13.1 million at the end of June to 24.6 million at the end of July. There are just 134 million shares outstanding after last month’s 1-for-20 reverse split.

More from Bloomberg:

Benmosche plans to rebuild the New York-based company’s profitable insurance operations as he seeks to repay the government bailout that was required because of losses on derivative contracts tied to subprime mortgages. He told employees on Aug. 4 that he won’t be pressured to sell assets to repay the government, and this week halted the auction of an investment advisory unit.

"My first charge is to get the company to operate at the level it used to operate, being the world’s best," he said. "The fact is we owe the U.S. government a lot of money and we are not going to be able to pay it back just by our profits, so we will sell some of the company off but only at the right time at the right price."

The insurer has announced about $9.3 billion in asset sales since its September rescue and still owes more than $40 billion on a Federal Reserve credit line.

The U.S. bailout includes a $60 billion credit line, an investment of as much as $70 billion and $52.5 billion to buy mortgage-linked assets owned or backed by the insurer. AIG agreed last year to turn over a stake of almost 80% to the U.S. in exchange for the bailout.

What, if anything, will be left for shareholders? Your guess is probably as good as Benmosche's at this point.

-- Tom Petruno

 

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