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Mar 02
2010

AIG’s big act of good faith

Posted by MQuinn in M&AinsuranceDealscareer/managementbailoutsAIG

MQuinn

I've previously railed against American International Group for dragging its feet in repaying the $180 billion it owes to the U.S. government, so I need to tip my cap to it for the $35.5 billion deal it struck with Prudential for its Asian insurance division.

And unlike some previous deals, AIG will use a major chunk of cash from the sale of the unit -- $25 billion -- to pay down a credit line it has with the Federal Reserve. (The insurer will take the remaining $10.5 billion in Prudential securities.)

It's a move the company had to make, really, especially as it continues to lobby against the pay caps the government has imposed. 

"This diminishes the wrath directed at AIG from Americans angry at the bailout," Clark Troy, a senior analyst with research firm Aite Group, told Bloomberg.

The anger directed at financial institutions is a big deal. Just ask Goldman Sachs, which listed "negative publicity" in the risk section of its recently filed 10-K. (Hat tip to the New York Times DealBook)

So while AIG had previously done a number of relatively minor deals -- at least minor compared to its indebtedness to the U.S. taxpayer -- the insurer finally made a major act of good faith. Indeed, the unit was considered its crown jewel and Thomson Reuters data showed it was the largest insurance M&A deal ever.

But here's hoping the company doesn't take what little good will it will gain from the deal for granted. There's still the matter of more than $100 billion left.

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