AIG was one of the hardest hit financial companies by the credit crisis and received multiple bailout packages from the government beginning in September 2008. AIG's outstanding balance of assistance from the government totaled $132.1 billion as of June 30. Of that balance, AIG must repay $101.2 billion; the rest is tied to the value of investments the government took over.
Under the plan being discussed with government officials, AIG would begin to fully repay the bailout as early as the first half of next year, according to the Wall Street Journal report, which cited unnamed people familiar with the matter.
The plan would begin with the Treasury Department converting $49 billion in preferred stock it holds in AIG into common shares, according to the report. The Treasury Department would then start selling those shares to investors. It would be able to pocket a profit if AIG's share price rises.
That move is similar to the deal the government struck with Citigroup Inc., which was another of the largest bailout recipients. Citigroup paid off a large chunk of the bailout money it received in cash, but also converted $25 billion it owed the government into common stock. The government has been selling those shares throughout this year at a profit.
For AIG, converting the preferred shares into common stock would increase the government's stake in the New York insurer to more than 90 percent from the nearly 80 percent it currently owns. The government received the nearly 80 percent stake in AIG as part of the initial bailout package.
AIG spokesman Mark Herr said, ``Our objectives remain the same: to repay taxpayers and position AIG over time as a strong, independent company worthy of investor confidence.''
He declined to comment specifically on any potential talks with the government.
AIG has been selling assets over the past two years since it received its first bailout, in an effort to streamline operations and repay the government debt. The company has been selling noncore assets like many of its foreign life insurance subsidiaries.
AIG made its largest one-time repayment of debt last month. It repaid $4 billion after its aircraft leasing unit successfully raised $4.4 billion in debt.
AIG remains on schedule to close the sale of its American Life Insurance Co. unit by the end of the year. It plans to use $16.5 billion from that sale to repay government debt as well.
AIG has focused on trying to return to consistently profitability in its primary businesses it plans to hold, such as its global property and casualty and U.S. life insurance operations.
AIG shares fell 49 cents to $36.43 in pre-opening trading.