AIG: Financial Winners & Losers

( AIG and other stock prices brought current in this update.)

NEW YORK ( TheStreet) -- American International Group ( AIG) was among several winners of the financial sector Tuesday after a top mutual fund manager increased his stake in the insurer.

AIG shares rose after Fairholme Capital Management, a mutual fund headed by Bruce Berkowitz, disclosed in a regulatory filing late Monday that it owns more than 32.79 million shares of the insurer, or 24.3% of AIG's outstanding stock. That's up from an 18.9% stake the fund reported in May.
AIG

Separately, Reuters reports that AIG's board of directors will meet on Wednesday to mull the future of its AIA unit, which was to be sold to the U.K.'s Prudential PLC ( PUK) before the $35 billion deal fell apart. Sources told Reuters that an initial public offering of the Asian insurance is the most likely outcome.

Shares of AIG are trading higher by $2.05, or 5.8%, to $37.62.

Similarly, MBIA shares rose after Berkowitz's Fairholme disclosed a stake of more than 22.73 million shares of the bond insurer, or 11.1% of MBIA's outstanding stock.

Shares of MBIA jumped by 66 cents, or 10.3%, to $7.09. Fellow bond insurer Ambac Financial ( ABK), which received a delisting warning from the New York Stock Exchange last week, was up 6.8% to 69.7 cents.

Elsewhere, major U.S. bank stocks were climbing Tuesday, with Citigroup ( C) leading the charge with a 3.7% gain. On Tuesday, Citigroup said it well its private equity fund of funds and co-investment businesses as part of the bank's strategy to reduce noncore businesses. Private equity firms StepStone Group and Lexington Partners are set to manage the businesses, Citigroup said.

Citigroup shares climbed 3.7% to $4.27. Among other winning U.S. bank stocks, Morgan Stanley ( MS) advanced 3.8% to $25.50, JPMorgan Chase ( JPM) rose 2.7% to $40.26, Goldman Sachs ( GS) gained 2.3% to $140.39, Wells Fargo ( WFC) was up 2.3% to $27.69, and Bank of America ( BAC) added 2.2% to $15.55.

The advance in U.S. bank stocks came a day after three Republicans announced plans to back the financial reform bill.

Sen. Scott Brown (R., Mass.) and Sen. Olympia Snowe (R., Maine) said they will join fellow Republican Senator Susan Collins in supporting the revised financial reform legislation. Brown said Monday that he would now support the bill after the $19 billion bank tax had been removed from the reconciled bill. Senate Majority Leader Harry Reid (D., Nev.) said the legislation would be wrapped up this week, The Associated Press reports.

Flagstar Bancorp ( FBC) was another top performer of the financial sector Tuesday after the bank said late Monday it has regained compliance with the New York Stock Exchange's minimum bid price requirement, a listing rule that says a stock must maintain a closing price of $1 or higher for 30 consecutive trading sessions.

Flagstar Bancorp shares were surging by 32 cents, or 10.2%, to $3.46.

Mortgage insurance stocks were also on the rise, with The PMI Group ( PMI) rallying 9.1% to $3.37, Radian Group ( RDN) rising 5.5% to $8.51, and MGIC Investment ( MTG) up 2.5% to $8.06.

-- Written by Robert Holmes in Boston.

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