AIG Plans Sale Of Business Units

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NEW YORK - The insurer American International Group Inc. said Friday it plans to sell off a number of business units to pay off its massive government loan, while retaining its U.S. property and casualty and foreign general insurance businesses.

AIG, one of the world's biggest insurers, also said it plans to retain an ownership interest in its foreign life insurance operations.

One unit that analysts have said could be sold is the International Lease Finance Corp., which leases out more than 900 aircraft with asset values topping $44 billion at the end of the second quarter. Other businesses AIG operates include life, commercial auto and accident and health insurers.

On the brink of failure last month, AIG was bailed out when the government offered it a two-year $85 billion loan to avoid bankruptcy during one of the most tumultuous times during the ongoing credit crisis that saw Lehman Brothers Holdings Inc. file for bankruptcy protection and the sale of Merrill Lynch & Co. to Bank of America Corp.

In return for the loan, the government received warrants to purchase up to 79.9 percent of AIG.

As of Sept. 30, AIG had drawn $61 billion on the credit facility.

The sale of some of its businesses will be used to pay off the outstanding government loan, which was made by the Federal Reserve Bank of New York. Additional funds will be used to help address the company's capital structure.

Problems at AIG did not come from its traditional insurance subsidiaries, but instead from its financial services operations, and primarily its insurance of mortgage-backed securities and other risky debt against default. If AIG couldn't make good on its promise to pay back soured debt, investors feared the consequences would pose a threat to the U.S. financial system, which led to the government bailout.

AIG said it was actively working on alternatives for its financial products business and its securities lending program.

AIG's traditional insurance subsidiaries have widely been viewed as safe and are likely to attract buyers. The New York-based insurer said it has already been contacted by a number of suitors.

Last week, during an interview with CNBC, billionaire investor Warren Buffett said his firm, Berkshire Hathaway Inc., would be interested in acquiring a couple of AIG's assets depending on what the company was willing to sell.

The smaller, more narrowly focused company will allow AIG to become "More nimble" and "solidly profitable," AIG's new chairman and chief executive, Edward Liddy said in a statement. Liddy took over as part of the government bailout agreement, replacing Robert Willumstad.

The Blackstone Group and JPMorgan Chase & Co. are working with AIG on the sale of its assets.

AIG shares were up 35 cents at $4.35 in premarket trading.