AIG reverse stock split 1-for- 20 (qty down 20x & price adjust up 20x) ex-1/7/09

SAN FRANCISCO (MarketWatch) -- American International Group Chief Executive Edward Liddy said Tuesday that he's been given no assurances that the government's 78.9% stake in the troubled insurance giant will ever change.

Liddy was responding to a shareholder who suggested during the company's annual meeting that a lower government stake could increase the value of the business. As AIG makes progress in its overall re-organization, a lower government stake might be discussed, Liddy added.

AIG /quotes/comstock/13*!aig/quotes/nls/aig (AIG 1.16, -0.17, -12.78%) is more stable than it was a few months ago, Liddy said earlier in the meeting.
Shareholders defeated a proposal to increase the number of AIG common shares, according to an early count at the meeting.

The insurer had proposed to increase the number of authorized shares of common stock from 5,000,000,000 to 9,225,000,000. The extra stock would have been helpful to AIG if the company decided to defer interest payments on junior subordinated debentures. It would also have helped AIG raise capital or swap debt for equity.

All other proposals passed and all AIG directors were elected. The insurer is planning a reverse stock split which is scheduled to take effect later on Tuesday.
AIG shares fell 13% to close at $1.16 on Tuesday.

AIG nearly collapsed last year under the weight of derivative-based guarantees on mortgage-related securities that the insurer sold during the credit boom earlier this decade. The government bailed the company out with more than $80 billion of taxpayer money and now owns 78.9% of the business.

AIG is trying to sell many of its businesses to repay government loans and become independent again. But the recession is making it difficult to sell units at good prices and the sheer extent of the government's involvement in the company remains daunting.

AIG is planning to sell some of American International Assurance Co., its Asian life insurance business, in a Hong Kong initial public offering next year.
AIG is also planning a 2010 IPO of American Life Insurance Company, or Alico, another large subsidiary that offers wealth management, retirement planning, life and health insurance outside the U.S. in 55 countries.

AIG put AIA and Alico in special purpose vehicles last week and gave the Federal Reserve Bank of New York preferred shares in the businesses worth $25 billion. That cut debt AIG owed the New York Fed to roughly $15 billion from $40 billion.
On Tuesday, AIG said it sold a credit card business in Taiwan. That follows several other sales, including most of its stake in reinsurer Transatlantic Holdings /quotes/comstock/13*!trh/quotes/nls/trh (TRH 43.33, +0.44, +1.03%) .
AIG is still deciding what to do with its large aircraft leasing business, ILFC, Liddy said on Tuesday. The unit has a lot of debt and leverage is viewed dimly by investors in the current environment, he explained.

Late Monday, AIG warned about credit derivative contracts it wrote for mainly European financial institutions that had a net notional value of $192.6 billion at the end of March.

Most of these contracts were written to help institutions hold less capital to support corporate loans and residential mortgage deals, AIG explained in a regulatory filing.

Regulatory changes mean most counterparties will likely terminate the contracts within the next 12 months. AIG Financial Products, the insurer's troubled derivatives unit, probably won't have to make any payments on the contracts, AIG said.

However, AIG also warned that it couldn't rule out reporting unrealized losses if the market value of the portfolio shifts.

"Given the size of the credit exposure, a decline in fair value of this portfolio could have a material adverse effect on AIG's consolidated results of operations or consolidated financial condition," the insurer said.