Large AIG share sales on track this year: Source

American International Group Inc shares are expected to settle back to a level in the mid-USD 40 range once the company's recently approved warrants begin trading, a person familiar with the situation said on Monday.

But even at that level, the government would still be looking at a USD 27 bn paper profit on its investment, which it could begin to realize with public share offerings as soon as mid-May, the person said.

AIG said last week its board approved the issue of warrants to purchase 75 mn common shares, one of the last key milestones in its recapitalization plan. A person familiar with the situation said last Friday the warrant issue meant the recapitalisation would close this week.

The person who spoke on Monday, on condition of anonymity because he could not speak publicly, said the market had likely been anticipating the value of the warrants as AIG shares rose sharply over the last month.

AIG shares closed at USD 57.39 on Monday. The stock is up 36% since December 8, when the the final version of the recapitalization plan was agreed.

The government rescued AIG from the brink of failure in September 2008. The company, once the world's largest insurer, was bailed out to the tune of USD 182 bn by taxpayers.

The recapitalization, first agreed last September, is a complicated deal that involves repaying the Federal Reserve Bank of New York and concentrating the government's stake in the hands of the US Treasury Department.

The Treasury will own 92.1% of AIG when the deal closes, a stake it intends to sell. The person who spoke last Friday said AIG was looking at a Treasury sale of a substantial stake as soon as March, although May was more likely.

Sources have said there could be a second large sale later this year as well, leaving the government with a smaller remaining position to be closed out in 2012.

Other sales coming

The first sale could happen in March, but is more likely after mid-May following AIG's filing of its report for the first quarter, the person said on Monday. The source suggested investors would need time to digest the "new" AIG in the first months of the year before a share sale.

In addition to the AIG share sales, it is likely the company would sell some of its large investments in insurers MetLife Inc and AIA Group Ltd this year as well, the source said. Each sale could top USD 6 bn in market value, the source added.

AIG acquired the MetLife shares through the sale of its Alico business to MetLife. The shares are currently under a lockup and subject to certain restrictions after the lockup ends, but a single large sale is still possible, the person said.

The AIA shares are not subject to such restrictions once a lockup ends, meaning they could be traded freely.

Stunning turnaround

All of the share and asset sales are successful, it would mark a stunning turnaround for a company that as recently as two years ago was fully involved in a breakup plan and still contemplating bankruptcy.

Instead, what has emerged is a company with a domestic life insurance business (SunAmerica) and one of the world's largest property and casualty insurers (Chartis).

Insiders and outsiders alike give much of the credit for the company's turnaround to its hard-charging chief executive, Robert Benmosche. Benmosche, who took over as CEO in August 2009, has continued working a full schedule and traveling the world, despite being in aggressive chemotherapy for cancer.

Benmosche intends to stay on until 2012, although he is expected to decide as soon as next month whether his health will allow it. AIG has said board chairman Steve Miller would step in as interim CEO if Benmosche cannot continue.

Miller, a restructuring expert, would stay on until the board picked a successor. It has already received a list of internal candidates from Benmosche, although much of the speculation centers on SunAmerica boss Jay Wintrob.

Whoever runs the company after Benmosche will still have a number of key decisions to make, such as what to do with aircraft leasing business ILFC and whether keeping SunAmerica and Chartis together in one holding company makes the most sense for the long term.