U.S. Govt sells American International Group, Inc. (NYSE:AIG) stake for $5 billion

The U.S. government will reduce its stake in insurer, American International Group, Inc.(NYSE:AIG) to 55 percent from 61 percent now after selling 163.9 million shares of the company to raise $5 billion.

The government had bailed out the insurance company in 2008 after the financial crisis which left big banks tottering, while several others went out of existence.

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The stake sale will result in a profit of $300 million to the U.S. Treasury in the entire bailout transaction. Announcing the deal on Friday the Treasury Department said that the shares are being sold at $30.50 each against the break-even price of $28.72 each.

Incidentally AIG, which has more or less recovered from the debacle and said earlier this week it has repaid most of its debt to the U.S. government, has offered to buy back up to $3 billion of the offering.

The government is reducing its stake in AIG in tranches and has already conducted three such transactions earlier, ensuring that it makes profits on all its sales. The government will still be left with about $25 billion worth of investment in the American insurer.

In order to prop up the bank it had received financial aid worth $182 billion, inviting a lot of criticism from investors and taxpayers as it was seen as putting good money after bad.

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Many of the banks which received bailout packages at that time have not been able to repay their debt.

Shares of AIG closed up 1.6 percent at $31.34 on Friday.