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U.S. Sells $4.5 Billion in AIG Shares

NEW YORK ( TheStreet) -- The U.S. Treasury on Friday announced a public offering of $4.5 billion in government-held shares of American International Group (AIG - Get Report), with the insurer quickly announcing it would buy back the majority of the stock.

AIG's shares were up 1% in afternoon trading, to $31.16, after the insurer said it would purchase $3 billion in stock sold by the Treasury at the offering price.

Subsidiaries of Citigroup (C), Deutsche Bank (DB), Goldman Sachs (GS) and JPMorgan Chase (JPM) were retained as joint bookrunners for the offering, and the underwriters were granted a 30-day option to purchase up to $675 million in additional shares from the Treasury.

This marks the Treasury's third offering of AIG shares this year. The first offering was for $6 billion worth of shares in March, with AIG buying roughly $3 billion in shares at the offering price of $29.00. The second offering was in May, for $5.7 billion, with AIG purchasing about $2 billion worth of shares, at a price of $30.50.

AIG reported that the Treasury held 61% of the company's common shares, after the May offering was completed.

AIG on Thursday reported second-quarter after-tax operating income of $1.9 billion, or $1.06 a share, which included a $1.3 billion fair value adjustment on the company's holdings in Maiden Lane III. A major highlight for the company's core operating results was a 26% year-over-year increase in insurance income, to $1.9 billion, after tax.

Goldman Sachs analyst Michael Nannizzi reiterated his "Buy" rating for the company's shares, with a $40 price target, and said that although AIG reported core earnings of 80 cents a share, his firm saw an "in line quarter," with operating earnings of 67 cents a share, which matched Goldman's estimate, after adjusting an unexpected $434 million in "earnings out of the Direct investment Book," and $118 million in real estate gains.

AIG's shares closed at $30.84 Thursday, returning 33% year-to-date.

AIG Chart AIG data by YCharts

The shares traded for nine times the consensus 2013 EPS estimate of $3.30. The consensus 2012 EPS estimate is $3.76.

Interested in more on American International Group? See TheStreet Ratings' report card for this stock.


-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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