AIG may consider dividend next year: CEO

(Reuters) - The U.S. Treasury's sell-off of its position in American International Group is happening sooner than expected, and the company may be in a position to consider a dividend by next summer, Chief Executive Bob Benmosche said on Tuesday.

Earlier on Tuesday, the U.S. Treasury said the underwriters of its recent $18 billion offering exercised their over-allotment option, selling another $2.7 billion in AIG stock.

That brought Treasury's proceeds from this sale - its fifth of AIG shares - to $20.7 billion and brought the government's stake in the insurer down to 15.9 percent.

"I think they'll be out pretty quickly," Benmosche told cable television news network CNBC in an interview. He added that he expected the government could be out entirely by next summer, potentially by selling shares directly into the market rather than with a single large offering.

The U.S. government rescued AIG from the brink of bankruptcy in September 2008 with a bailout that ultimately reached $182 billion. After a series of changes to the rescue package, the U.S. Treasury ended up with a 92 percent stake in the company.

With the government out, Benmosche said AIG's focus would turn to considering a dividend, assuming capital positions and regulators allow for it by then.

"I believe, strategically, we should have a dividend on this stock," he said.

Benmosche also said AIG was likely to close or sell its bank unit, a small operation whose ownership means AIG will be regulated as a savings and loan holding company by the Federal Reserve.

He said the point of selling the bank was not to escape Fed oversight, but rather to avoid some of the constraints that strict trading regulations known as the "Volcker Rule" would otherwise put on the company's operations.

Benmosche, who is given much of the credit for the company's turnaround, said it was clear that whatever happened with buybacks or dividends, AIG needed to maintain a strong capital cushion.

In addition to the cash currently on hand, the insurer still has a position in its former Asian subsidiary, AIA Group Ltd, which it can sell. It also owns the aircraft leasing business ILFC, which filed to go public last year but has not made any progress since on a sale.

Benmosche said the markets were not ready for an ILFC offering, and that AIG would have to be patient to sell that business, which he has previously estimated was worth around $8 billion.

With the government largely out of the way, and most asset sales either complete or on their way to fruition, analysts are turning their focus more closely on AIG's underlying operations. That focus drew two very different reactions from credit ratings agencies on Tuesday.

Standard & Poor's changed its outlook on AIG to "negative" from "stable," saying it was more likely to lower the company's rating in the next six to 24 months.

Fitch Ratings, on the other hand, raised its issuer default rating on the company, citing its success restructuring and reducing leverage in the last few years.

(Reporting by Ben Berkowitz in Boston; editing by Gary Hill and Matthew Lewis)

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