AIA Shares Jump 17% in First Day of Trading, AIG Could Benefit (AIG)

American International Assurance (AIA), the insurance unit that American International Group AIG recently spun off into public trade, is up 17% in its first day of trading. With the closing share price of 23.05 Hong Kong dollars, the company is now worth $35.8 billion. According to a New York Times report, "Spinning off the unit, known as A.I.A., in Hong Kong's largest initial public offering has been a coup for A.I.G., both financially and politically, as the bailed-out United States insurer has taken a step toward paying down the $130 billion spent on its rescue." Shares of AIG are down $0.38 Friday, to $41.60. Notably, AIG could raise as much as $20.5 billion if it exercises its right to sell shares within a month of the initial public offering. An overallotment option would allow AIG to benefit from the rising share price, and by selling the maximum number of shares, AIG would reduce its stake in AIA from 58 percent to 33 percent. AIA, headquartered in Hong Kong and operating in 15 countries, foresees a pretax profit of $2 billion this year. The New York Times report notes that "The Federal Reserve Bank of New York, which is part of the United States central bank, will receive the first $16 billion in proceeds from the sale. The Fed had swapped $16 billion of its rescue loan to A.I.G. last year for the right to receive the first proceeds. The swap bought A.I.G. time, enabling it to avoid selling the Asian unit at a fire-sale price."