American International Group Inc’s US government rescue may cost taxpayers $2.9 billion less than previously estimated because prospects for the insurer had improved, the Treasury Department said.
AIG’s bailout is expected to cost the Treasury $45.2 billion, based on March 31 data, compared with a $48.1 billion estimate from November 2009, the department said in a statement. The New York-based insurer’s $182.3-billion rescue includes as much as $69.8 billion from Treasury, a $60-billion Federal Reserve credit line and up to $52.5 billion to buy mortgage-linked assets owned or backed by AIG.
Chief Executive Officer Robert Benmosche said last month AIG was “now on a path” to repaying the Fed after deals to sell two divisions for about $51.5 billion. AIG would turn to reducing its Treasury obligations after the sales are completed by year-end, he said. AIG posted a $1.45 billion first-quarter profit, and its plane-leasing and consumer-finance units were able to tap credit markets after being shut out in 2009.
“The estimated costs for AIG decrease slightly due to its increased financial stability,” Treasury said in the presentation on its website.
The insurer had tapped about $47.5 billion of its Troubled Asset Relief Program (TARP) assistance as of March 31 and paid no dividends on the funds, Treasury said. Mark Herr, an AIG spokesman, declined to comment.
There was “uncertainty” about the estimate for AIG losses because of the lack of a market for the government’s preferred shares in the insurer, Treasury said in a separate presentation. The department based its valuation partly on stock and debt prices and assumptions “about payouts in different outcomes.”
The Government Accountability Office said in December taxpayers would probably lose $30.4 billion on the AIG bailout. In April, the congressional auditors released another report saying that the insurer’s subsidiaries are “showing signs of recovery.”
The projected cost of TARP from bailouts in industries including banking and insurance narrowed by $11.4 billion to $105.4 billion, fueled mostly by gains as of March 31 in Citigroup Inc. stock held by the government and investments in US automakers, according to Treasury.
Congress authorized $700 billion for TARP in October 2008 to prevent a collapse of the US financial system. The programme has been criticized by lawmakers from both parties, including Senator Maria Cantwell, a Democrat from Washington, and Representative Jeb Hensarling, a Texas Republican, for helping big banks more than average citizens.
