NU Online News Service

American International Group Inc. (AIG) said the sale of oneforeign insurer and the initial public offering of a second haveraised enough money to repay a line of credit it has with theFederal Reserve Bank of New York (FRBNY).

Today, AIG closed the sale of American Life Insurance Company(ALICO) to MetLife Inc. for $16.2 billion and raised about $20.5billion from an IPO of its unit, AIA Group Ltd. in Hong Kong. Ofthe $36.71 billion raised from these transactions, about $27.71billion is in cash.

About $20 billion in principal and interest is owed to the FRBNYas of Oct. 27, AIG said. The remaining cash will be put towardpaying other government obligations.

"We promised the American taxpayers we would repay them, and theinitial public offering of AIA last week and the completion of theALICO transactions move us closer to deliver on our promise," saidRobert H. Benmosche, AIG president and chief executive officer, ina statement.

The ALICO sale includes $7.2 billion in cash and $9 billion inMetLife securities to be sold over time to provide more funds topay back the government, which made more than $182 billionavailable to the New York-based company two years ago when it faceda liquidity crisis due to a downgrade in its credit rating. AIGsaid it owed the government $101.2 billion as of June 30.

The news comes about a month after AIG announced its plan withfederal officials to repay American taxpayers and restructure thecompany.

Then AIG said its direct debt to the FRBNY and the $26 billioninterest the FRBNY has in two special purpose vehicles (SPV) willbe repaid in full and AIG will issue common stock to the U.S.Treasury Department to up its ownership in AIG to about 92 percentfrom 80 percent. This will be accomplished by converting $49.1billion of preferred shares it has under the Troubled Asset ReliefProgram (TARP) into about 1.66 billion shares of common stock.

The Treasury will then sell the common stock to the public overtime, but not until the FRBNY is repaid.

To repay the $26 billion interest the FRBNY has in two specialpurpose vehicles, $22 billion in TARP funds will be used topurchase an equal amount of interests in each SPV before givingthem to the Treasury as part of the plan to sell stock to thepublic, AIG said.

ALICO RATING

Standard & Poor's Rating Services said it changed itsoutlook on ALICO from negative to positive after the acquisition byMetLife and affirmed ALICO's A-plus counterparty credit andfinancial strength ratings.

"We consider ALICO to be a strategically important subsidiary tothe MetLife group," said Shellie Stoddard, S&P credit analyst.The acquisition will allow MetLife to grow internationally andshift its business mix to more lower-risk products.

The outlook on MetLife remains negative due to uncertainty inthe operational and integration risks associated with theacquisition as well as the need to build operating capital and theneed to enhance enterprise risk management to control internationalrisk, S&P said.

Fitch Ratings upgraded to AA-minus from A-plus the financialstrength rating assigned to ALICO and affirmed all existing ratingsassigned to MetLife and its subsidiaries. The rating outlook isstable.

Fitch said ALICO maintains top five market share in 23 of 55countries. Its biggest market is Japan, which accounted for about70 percent of operating income in 2009. Here ALICO sells individuallife, accident & health, and fixed annuity products via severalchannels.