UPDATE 1-US Treasury says has completed final sale of AIG stock

Fri Dec 14, 2012 11:55am EST

* Treasury's AIG stock holding drops to zero

* Held 1.655 bln shares in Jan 2011

Dec 14 (Reuters) - The U.S. Treasury Department said on Friday it has completed its final sale of common stock in American International Group, reducing its shares in the insurer to zero four years after a massive government bailout.

Treasury said it received $7.6 billion in proceeds from the sale of its remaining 234 million shares at $32.50 per share. Overall, Treasury and the Federal Reserve received a $22.7 billion positive return on their combined $182.3 billion bailout, the department said.

"Today officially begins a new chapter at AIG," Chief Executive Robert Benmosche said in a statement.

The sale is part of Treasury's efforts to wind down its Troubled Asset Relief Program (TARP), created in 2008 to help rescue companies stricken by the financial crisis.

More than 90 percent ($380 billion) of the $418 billion disbursed for TARP has already been recovered to date through repayments and other income, Treasury said in a statement.

AIG was rescued just before it would have been forced to file for bankruptcy, as losses on risky derivatives mounted. It was bailed out as the financial system stood at the brink of disaster, shortly after Lehman Brothers filed for bankruptcy and Merrill Lynch sold itself to Bank of America.

AIG shares were down 0.7 percent to $34 in midday trade on Friday.