American International Group Inc (NYSE:AIG) Sells Off Its Aircraft Leasing Business

Posted by Lynn Eisler December 17, 2013 0 Comment 805 views

American International Group Inc (NYSE:AIG), the $74 billion market capped property and insurance provider has decided to divest its aircraft leasing business in its execution of road map to exit non core business and retain its focus on its bread and butter insurance business. This decision was announced by the insurance firm yesterday to reporters.

As per the announcement, American International Group Inc (NYSE:AIG) will be selling all of its aircraft leasing business to AerCap Holdings N.V.(NYSE:AER) for a reported consideration of $5.4 billion. On the back of this announcement, the share price of AerCap Holdings N.V.(NYSE:AER) went up by a huge 33 percent during trading yesterday.

Readers should note that this cutting of excess baggage and concentrating on core business strategy was determined by the firm in its efforts to pay back the Government for rescuing it during the 2008 financial crisis. A total of around $182 billion was poured into the operations of the insurance firm during the financial crisis in order to prevent the firm from going belly up due to its exposure to derivates which went bust in the run up to financial crisis.

On the back of this news that stock price of American International Group Inc (NYSE:AIG) jumped by a 1.1 percent during trading yesterday. American International Group Inc (NYSE:AIG) shares are trading at $50.28 per share as of close of business yesterday, which is just 5.5 percent lower than its prior 52 week high price point. In the past year the stock has posted 48 percent increase in its market value in spite of the uncertainties related to the insurance business in recent times.

While the share market has not been too receptive to the selloff, analysts have been more kind to American International Group Inc (NYSE:AIG). Clifford Gallant, who is an analyst with Nomura Equity Research, has been quoted as saying “It’s a good transaction for AIG. It gets to retain 46 percent, so they get a future earnings stream from the company. It simplifies AIG’s balance sheet, enabling them to do things like buy back stock or have more capital flexibility.”

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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