Reporting from New York — In its biggest move yet to repay tens of billions of dollars in federal bailout money, American International Group Inc. agreed Monday to sell its Asian life insurance business for $35.5 billion.
The sale of AIA Group to British insurance giant Prudential will let AIG return $25 billion to the Treasury Department and the Federal Reserve as soon as the deal closes, the New York-based company said.
That would reduce AIG's bailout tab to about $70 billion from about $95 billion.
The successful sale of the Asian unit also makes it more likely the government will be paid back in full, said Cathy Seifert, a stock analyst at Standard & Poor's.
"This represents more progress than we've seen previously," she said. "There's still just a lot of uncertainty. . . . The hope is that you start building on some of this positive momentum."
AIG nearly collapsed during the financial crisis because of its sales of complex securities that in effect insured a huge amount of mortgage-related bonds. The government committed as much as $182 billion to save the financial giant, investing more than $130 billion of that amount in the company.
Some of the money came from the Treasury Department and some from the Federal Reserve Bank of New York.
AIG had discussed selling AIA's stock in an initial public offering but opted for an outright sale after concluding it would be the fastest way to raise cash.
"We are committed to repaying the taxpayer in full," said Mark Herr, an AIG spokesman.
But analysts are mixed on AIG's ability to do that. Last week, the company reported a $10.9-billion loss for 2009. Last fall, the Government Accountability Office estimated that the Treasury stood to lose $30.4 billion on its AIG investment.
At least some stock investors believe that not only will the company be able to repay the government, but also that some value will remain for AIG shareholders.
AIG's stock rose 4.1% to $25.78 on news of the deal Monday. It's down 98% from January 2008.
The $35.5-billion price for AIA includes $25 billion in cash, with the rest in securities that AIG expects to sell over time. The firm is in talks to sell another insurance unit, Alico, to MetLife Inc.