AIG can raise enough to help buy out gov't-analyst

Wed May 30, 2012 11:11am EDT

* Company should raise more than $15.4 bln-analyst

* Stock undervalued compared to peers-analyst

* Shares off 16 pct over last four weeks

May 30 (Reuters) - Bailed-out insurer AIG should be able to raise enough capital in the near term to buy out the U.S. government's remaining 61 percent stake, assuming both the company and the public share in any stock offering, Sandler O'Neill analysts said on Wednesday.

In a note to clients, Sandler estimated that AIG would be able to raise $18.2 billion over the next year. That would be more than enough, assuming the government's remaining stake is worth about $30.75 billion and that the U.S. Treasury sells half of any offering to the company and half to the public.

"AIG has participated in approximately half of each offering to date, which suggests that AIG needs to find approximately $15.4 billion to pay off the government's stake," analyst Paul Newsome said.

The money could come from a variety of sources: $7 billion from AIG's interest in the U.S. Federal Reserve entity Maiden Lane III, $5.5 billion from selling shares of Asian insurer AIA , $4.5 billion from retained earnings and roughly $1.2 billion from an initial public offering of plane leasing unit ILFC.

In the same note, Newsome upgraded AIG shares to "buy," citing the stock's recent decline and cheap valuation compared to peers. AIG trades at just above half of book value, while other property insurers are trading at book and life insurers are trading at nearly 80 percent of book.

AIG shares were down 2.2 percent at $29.13 in morning trading. Since hitting a 13-month high in early May the stock has shed roughly 16 percent of its value, more than twice the decline of the Standard & Poor's insurance index.