aig stock

aig stock

June 30 (Bloomberg) -- American International Group Inc., the insurer bailed out by the U.S., has an “excellent chance” of repaying the government, outgoing Chief Executive Officer Edward Liddy said today at the company’s annual meeting.

AIG plans to reduce its debt under a Federal Reserve credit line by $25 billion by handing

over stakes in two non-U.S. life insurance units, the insurer said last week. The New York-based company has tapped about $40 billion from the line.

AIG has received four bailouts, totaling $182.5 billion, after agreeing in September to turn over a majority stake to the U.S. when the company was overwhelmed by losses on bets tied to the housing market. In addition to a $60 billion credit line, the rescue includes $52.5 billion to buy mortgage-linked assets owned or insured by the company, and an investment of as much as $70 billion.

“We believe there is an excellent chance that we can repay the government,” Liddy said. “The government is not prepared to make any adjustments” to the arrangement that turned over majority control to the U.S., he said. “My hope would be that as we make progress in the overall restructuring, that maybe those conversations will bear fruit.”

Liddy’s remarks echo comments he made to Congress last month when he said the company can pay back the credit line and a $40 billion stock investment within five years by selling units or holding stock offerings for businesses. The insurer may need more time if markets worsen, he said then.

Real Estate, Planes

AIG has disclosed transactions raising about $6.7 billion, striking deals to sell a U.S. auto insurer, an equipment guarantor, its New York headquarters and a Japanese office tower. The insurer is negotiating to sell other units including airline-leasing and consumer-finance operations, Liddy said.

“We have determined the destinies of nine of our major businesses spanning everything from life insurance in Taiwan to global real estate, and have specific plans for each of those nine,” Liddy said today. “We expect this process to advance steadily in the next six months, and may involve public offerings.”

The insurer has previously said it may sell shares in non- U.S. life businesses and the property-casualty operation.

Today’s meeting, previously scheduled for May 13, had been postponed as the trustees overseeing the U.S. stake sought newcomers for the board. New directors elected today include Harvey Golub, Laurette Koellner, Christopher Lynch, Arthur Martinez, Steve Miller and Douglas Steenland.

Search Is On

Board members Liddy, Dennis Dammerman, George Miles, Suzanne Nora Johnson and Morris Offit were re-elected. Liddy, who said last month he will step down as CEO as soon as a replacement takes over, has said he also plans to resign as chairman and that the two posts should be split.

AIG hired executive search firm Spencer Stuart to find the next CEO, two people familiar with the situation have said. Thomas Neff, U.S. chairman of the recruiting firm, is involved in the search, said the people, who declined to be named because the process isn’t public.

Liddy, 63, came out of retirement last year to run the company after it was taken over by the U.S. He drew an annual salary of $1.

Golub was CEO of American Express Co. from 1993 to 2001. Koellner is a former president at Boeing Co. Lynch is a retired partner at consulting firm KPMG International. Martinez was CEO of Sears Roebuck & Co. Miller is chairman of Delphi Corp. and a former chief financial officer of Chrysler Corp. Steenland is the ex-Northwest Airlines CEO.

‘Good Riddance’

Among those leaving are KB Home Chairman Stephen Bollenbach, AIG’s lead independent director; Harvard University professor Martin Feldstein; and James Orr, whose reappointment was opposed by unions because of his role on the compensation committee.

“Goodbye and good riddance,” said shareholder Kenneth Steiner when the meeting was opened to questions from investors. “I hope our new directors will do a better job.” Steiner, from Great Neck, New York, said after the meeting he currently holds 10,000 AIG shares.

The conference room where the meeting was held had several dozen empty seats, compared with a packed room a year earlier. The shareholders who spoke inquired about AIG’s internal controls prior to its takeover, plans for the government shares and the future direction of the stock.

Liddy ‘Sorry’

Liddy was asked during the meeting by one investor -- Kathy Ryan of Brooklyn -- for advice on whether she should sell her AIG shares. Holdings of about $180,000 in AIG stock purchased in 2007 have plunged to about $3,500, Ryan said after the meeting.

“I’m such a bad stock picker,” Liddy told her. “I’m sorry that happened to you.”

Investors also approved a reverse split, in which they will turn in 20 shares for a new one. A higher share price may attract institutional investors, the company said in a proxy statement last month. The stock has declined about 96 percent in the past 12 months. The reverse split is effective after the close of regular trading today, AIG said.

AIG dropped 17 cents, or 13 percent, to $1.16 at 4:01 p.m. in New York Stock Exchange composite trading after saying late yesterday that valuation declines on derivatives sold to European banks could have a “material adverse effect” on the company’s results.

Derivatives

The risk of losses on the derivatives may last “longer than anticipated,” the insurer said in a regulatory filing updating the “risk factors” in its 2008 annual report. The firm had $192.6 billion in swaps allowing lenders to reduce the funds they had to hold in reserve as of March 31, AIG said.

Gerry Pasciucco, hired from Morgan Stanley in November to clean up AIG’s Financial Products operation, is under pressure to unwind the contracts.

“I can’t say enough about how he and his colleagues have maintained their focus,” at the unit after criticism for retention bonuses to employees, Liddy said today of Pasciucco.

AIG shareholders rejected a proposal to increase the number of authorized common shares. The plan was a requirement of a hybrid bond issuance made in early 2008, said Christina Pretto, an AIG spokeswoman. The defeat “has no bearing on the debt issued” and the proposal will be included on the ballot next year, she said.

Also attending were retired AIG employees, including Kathleen Mylott, who says she worked in the insurer’s property- casualty division from 1990 to 1997. The near collapse of the insurer last year and its subsequent bailouts have tarnished her memories of a unique corporate culture, she said.

“It’s like watching your house burn down,” Mylott said after the meeting. “The emotional toll has been worse than the financial toll, if you can believe that. It’s an American tragedy.”

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net; Tian Huang in New York at thuang57@bloomberg.net.