Colin Barr

Following the money in banking, economics, and Washington

AIG's long road to stock buybacks

June 22, 2011: 4:21 PM ET

Who is most eager to put the AIG bailout in the rearview mirror?

The government would certainly like to sell off its holdings in the giant insurer sooner rather than later. Witness its decision to sell a big chunk of AIG (AIG) shares this spring even with the stock down sharply from its level at the end of 2010.

Treasury's magic number is $28.73

But AIG chief Bob Benmosche makes clear in the video below that he too sees a profitable government exit as a crucial index of AIG's health.

"We expect to help Treasury sell off their shares such that the American taxpayer is going to receive back all of their money from the TARP program plus a profit," Benmosche tells CNNMoney. "That will continue, and the better we do, the more shares that can be sold in AIG at a profit."

Benmosche says he believes that if AIG continues to perform well, Treasury could be out of its majority holding – recently accounting for 3 in 4 AIG shares – by this time next year.

One incentive for Benmosche to get his biggest shareholder out at a profit: AIG could start buying back shares, boosting its sagging stock price (see chart, right), rather than having a big seller constantly pushing more supply onto the market.

Benmosche says the company expects to generate $25 billion in excess cash over four years, money he says could go "potentially" to buying back stock or making acquisitions. He says he expects AIG will be bigger down the road – but it would obviously help shareholders if the company could sop up some of the shares floating around.

But when you've been where AIG has been, first things have to come first.

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Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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