AIG Selling Its Crown Jewel to Pay the Goverment Back

Instead of doing the IPO, AIG is selling one of its most profitable and highly regarded insurance subsidiary in the high-growth region, AIA, to U.K.'s Prudential for $35.5 billion, as part of the effort to repay the U.S. government.

The U.S. government bailed out A.I.G., which was essentially a bailout of AIG's counterparties who also bet against CDOs insured by AIG's CDS. The sale of AIA is viewed in Asia as an inexplicable act, as they know that AIA is one of the top insurance companies in the region. Prudential is licking the chops, for very good reason.

The Federal Reserve Bank of New York owns the $16 billion preferred shares of AIA. The NY Fed will have their money back and probably a lot more, and they will claim how successful the government bailout is. See, we got your money back! The problem is that they didn't bother to ask us when they put the money in AIG, and we are not going to see that money back in our pockets.

AIG President and CEO Bob Benmosche says, as reported by Huffington Post:

"This transaction, the most significant milestone to date in our ongoing effort to repay taxpayers, also gives us greater flexibility to move forward with AIG's restructuring and focus on enhancing the value of our key insurance businesses, which will benefit all stakeholders."

Enhansing the value of their key insurance businesses by selling off one of their most successful insurance business in the fastest-growing region. Now that makes sense. What else are they selling to enhance the value of their insurance businesses?

AIG, who started its existence in Shanghai, will now be severed from its roots. All for paying back the government who was there to "rescue" big Wall Street banks, who essentially forced the "rescue".

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