American International Group, recipient of a $182.3 billion bailout, will repay rescue funds with interest, chief executive Robert Benmosche said Wednesday.
“I’m confident you’ll get your money, plus a profit,” Benmosche told the Congressional Oversight Panel in Washington in a hearing to examine the rescue and taxpayers’ prospects of being repaid.
The insurer will repay a Federal Reserve credit line after the sales of two non-U.S. life-insurance divisions are completed this year for about $51 billion and then turn to Treasury Department obligations, Benmosche said. AIG posted net income of $1.45 billion in the first quarter.
“There are a lot of things that have to occur before we’ll know” whether AIG can fully repay the U.S., said Jim Millstein, the Treasury Department’s chief restructuring officer. The value of Treasury’s AIG investment depends on the performance of its insurance units and its stock valuation, he said.
The insurer could earn $6 billion to $8 billion next year, after taxes and accounting charges, Benmosche testified.
Benmosche addressed the panel after Cliff Gallant, a KBW Inc. analyst, cut the stock to “underperform” last month on the prospect that meeting U.S. obligations may wipe out common shareholders.
AIG shares, which closed at $34.05 in New York Stock Exchange composite trading, may be worth $6 in an optimistic scenario within a year, Gallant wrote. When asked why the stock trades for more than his projected value, Gallant said buyers may be assuming the government will again relax bailout terms for the insurer.
When asked about Gallant’s analysis, Benmosche countered: “You’ll have to see if he understands the company as well as I do.”
His response was criticized by Damon Silvers, a member of the oversight panel.
“That’s not an acceptable answer,” Silvers said. “We’re trying to look out for your majority stockholder. I am frankly frightened by what Mr. Gallant said on behalf of the American public.”
AIG hasn’t been paying dividends to the Treasury on more than $40 billion of preferred shares, which panel chairwoman Elizabeth Warren estimated resulted in $5 billion in lost payments.
