AIG CEO Says U.S. Taxpayers to be Repaid by 2013
April 8, 2010 – Officials for taxpayer-rescued American International Group (AIG) have announced the insurer likely will repay its entire debt to U.S. taxpayers before 2013.
Recent deals in which AIG officials sold or reached agreements to sell large overseas insurance subsidiaries, including Asia-based American Life Insurance Company (Alico) to MetLife for $15.5 billion and American International Assurance (AIA) to Prudential for $35.5 billion, have boosted AIG’s capital to the point its top executive says company officials should be able to begin negotiating a final settlement on its federal debt before 2013.
No specific repayment date has been targeted, but AIG officials said they are ready to begin detailed discussions of an eventual exit strategy for AIG to completely repay its current $102 billion debt to U.S. taxpayers, AIG Chief Executive Officer Robert Benmosche told Reuters. AIG officials hope to map out a clear exit strategy over the next year or so, according to Reuters. The debt must be repaid by Sept. 16, 2013, in accordance with terms of what was a nearly $183 billion, taxpayer-backed line of credit extended to AIG in 2008.
Although it is headquartered in Delaware, Alico mostly does business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. Industry analysts say $15.5 billion is a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia.
Hong Kong-based AIA has been in business more than 90 years and is one of the largest insurers in Asia with more than $60 billion in assets and about 20 million policyholders. AIG officials earlier weighed an initial public offering of AIA shares on the Hong Kong stock exchange when initial interest in purchasing the company was light during tightened global credit markets. Purchasing AIA would make Prudential one of the largest insurance companies in the Asian market while giving AIG a significant boost in funds with which to repay its debt to U.S. taxpayers.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under a later revision, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts. The latest bailout adjustment boosted to nearly $183 billion the total amount available to AIG officials.
AIG is attempting to sell off its overseas life insurance units and other subsidiaries to repay its debt and has raised nearly $12 billion through sales of subsidiary units and other assets. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
Hartford Officials Announce TARP Repayment Plan
March 17, 2010 – Officials for The Hartford Financial Services Group yesterday announced a plan to repay its $3.4 billion debt to U.S. taxpayers.
The Hartford plans to sell nearly $1.5 billion in common shares, $500 million in preferred shares and $425 million in senior notes. The Hartford officials also plan to issue another $675 in senior notes through 2011. The funds will be used to repay the $3.4 billion borrowed through the federal Troubled Asset Relief Program (TARP) fund, which generated a great deal of controversy for a ranking U.S. Senate Democrat.
“We appreciate the critical role the government and the American taxpayers have played in stabilizing the financial markets and we are pleased to announce a plan to repurchase Treasury’s investment in fewer than 10 months,” said Hartford Chairman, President and Chief Executive Officer Liam McGee said in a prepared statement. “The Hartford always viewed the investment as temporary capital and intended to return it as soon as prudent.”
Officials for Connecticut-based The Hartford Financial Services Group in 2009 requested the taxpayer aid after suffering steep losses during the 2008 economic crash and were approved for participation in the TARP program with the help of embattled U.S. Senator Chris Dodd (D-Connecticut). Dodd chairs the U.S. Senate Committee on Banking, Housing & Urban Affairs. The Hartford Financial Services Group donated a total of $161,600 to the Senator’s campaign while donors affiliated with The Hartford contributed another $94,550 to Dodd’s political ambitions in 2008, according to OpenSecrets.org. Currently, Dodd has accepted at least $115,300 from the Hartford Financial Services Group and another $94,550 from The Hartford toward any future election campaigns.
With Dodd’s help, The Hartford was among six major U.S. life insurance companies to be allowed access to the federal TARP program initially intended for ailing banks and other financial institutions. The $700 billion TARP fund was intended to purchase toxic assets and strengthen American banks to stave off a potential collapse of the nation’s financial sector. Federal officials since have changed the scope of the TARP program to allow other financial institutions to participate.
But Dodd, along with President Barack Obama, has received harsh criticism for using the TARP fund to bail out political benefactors as well as ensuring executives at AIG, Fannie Mae and Freddie Mac would receive contractually obligated bonus pay despite their respective institutions needing taxpayer dollars to remain in business. The three organizations are among several that continue to ply Dodd, Obama and others with campaign donations despite having accepted federal bailout money.