AIG Bulls See Freedom Ahead

Shares of AIG rose Friday following a report that the U.S. government may soon cash in on the tremendous surge in the giant insurer's stock since the start of the year.
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NEW YORK (

TheStreet

) -- The U.S. government may soon cash in on the tremendous surge in

American International Group

(AIG) - Get Report

stock.

The Treasury Department owns $47 billion worth of preferred stock in AIG, which can be converted into common shares. The government holds an 80% stake in the insurer, whose recent market value has remained below $6 billion.

A

Bloomberg

report on Friday citing anonymous sources says the Treasury is formulating plans to wind down its stake over a two-year period that could begin as early as the fourth quarter. The government would need to spread its stock sale out over time to avoid pressuring the price by dumping the huge stake on the market all at once. It is using the same strategy to exit its large position in

Citigroup

(C) - Get Report

.

Spokespeople from AIG and the Treasury wouldn't comment on the report.

Though still hobbled and beleaguered by political concerns, AIG has made tremendous progress in its restructuring effort over the past several months. Under the stewardship of CEO Robert Benmosche, the firm has been working to sell noncore divisions,

moved forward on plans to repay bailout funds to the

Federal Reserve

, and begun winding down a

huge portfolio of derivatives trades that brought the insurer to its knees.

Meanwhile, its stock -- which had reached penny-stock territory before a 20-for-1 reverse split -- has soared.

AIG shares are up 48% over the past 12 months, and 44% year-to-date, as of Thursday's close at $43.25. The stock was climbing higher on Friday, up 2% to $44.15 in recent trading, on volume of 10.3 million, compared to the issue's trailing three-month average of 19.1 million.

-- Written by Lauren Tara LaCapra in New York

.