By Paritosh Bansal Paritosh Bansal  – Wed Sep 29, 3:46 pm ET

NEW YORK (Reuters) – American International Group Inc is seeing plans to free itself of U.S. government support start to come together two years after it was bailed out and expects taxpayers to profit from their investment.

AIG is close to finalizing a plan for the government to sell its stake in the insurer, which would see the Treasury Department convert $49 billion of preferred stake into common shares to be sold over time, Chairman Steve Miller said on Wednesday.

AIG also is close to a deal to sell two life insurance units in Japan to Prudential Financial Inc for about $4.8 billion in cash, a source familiar with the matter said.

The developments show AIG is making significant progress in disentangling itself from the government, although it still has a long way to go before the U.S. taxpayers get paid back in full for their $182.3 billion rescue package.

An announcement of the repayment plan, which another source said could come within days, would also mark a big win on a politically charged bailout for the government at a crucial time. The $700 billion Troubled Asset Relief Program, or TARP, set up amid the 2008 financial crisis expires on Sunday and the United States is set to go to polls for mid-term elections in November.

AIG has not drawn on all the assistance and needs to pay back around $100 billion, with the money going to the Federal Reserve Bank of New York and the Treasury. The government also owns nearly 80 percent of AIG.

“We want to get the total to zero,” Miller told reporters on the sidelines of a conference. “If we are successful and do as well as we hope then actually the government would have walked away with a big profit.”

Miller, a corporate turnaround specialist, alluded to his role at Chrysler in early 1980s, when the government made a roughly $300 million profit for backing a $1.2 billion loan to the automaker.

Chrysler had a 10-year deal with the government and paid it back in three years, Miller said.

Still, a profitable exit for AIG will require patience and several factors to line up favorably, such as macro trends in life and general insurance that AIG sees as its core, Aite Group senior analyst Clark Troy said.

“To exit at a big profit, there needs to be dynamism,” Troy said. “There needs to be a highly positive feeling about their operating results and their prospects for growth.”

AIG shares were up 1 percent at $37.70 on the New York Stock Exchange on Wednesday afternoon.

BOARD MEETING

The insurer’s board is meeting later on Wednesday to discuss the exit plan, Miller said at the Dow Jones Private Equity Analyst conference in New York.

Miller, who took over as chairman of the company in July, said that talks with the government were nearing a conclusion that could be a “win-win” deal for stakeholders.

But he pointed to complexity of negotiations, saying the plan had to work for several different parties like the Treasury, the Fed, the trust that holds the Treasury’s stake as well as the ratings agencies.

“We are talking to several different parties in the government. And we are working off documents that were created with care but with haste two years ago when the world was falling apart,” Miller said.

Miller said the exit plan will give AIG the ability to issue new debt.

“We think with the clarity of what we hope to get done here in the current discussions, we will be able to re-access the public markets sometime over the next six months to a year,” he said.

A conversion of the Treasury’s preferred stock into common could start as soon as the first half of next year and will see the government’s stake in the insurer increase to more than 90 percent before being sold over time, sources have previously told Reuters.

“It will be a matter of balancing the speed of exit versus maximizing the value realized by the taxpayers,” Miller said.

AIG’s board would finalize the exit plan on Wednesday and could announce the plan on Thursday, CNBC reported, citing senior government officials.

PRUDENTIAL DEAL

A deal to sell AIG Edison Life Insurance Co and AIG Star Life Insurance in Japan to Prudential, which the source said is expected to be announced soon, will be the latest divestment by the company in its repayment efforts.

Prudential, which already has a significant presence in Japan, said earlier this month it sees sustainable growth potential there, driven by an aging population and demand for retirement and savings products.

“They have a strong franchise their and it strengthens their position there even further,” Troy said.

The U.S. insurer also is flush with cash, Troy said. “It was presumed that Prudential was going to make an acquisition.”

Prudential and AIG declined to comment on the expected deal. The source is anonymous because the deal is not yet public.

Prudential’s shares were up 1.2 percent at $56.46 on the New York Stock Exchange on Wednesday afternoon.

The bailout terms call for the Fed to be paid back before the Treasury. AIG still owes the Fed about $20 billion under a credit facility. The Fed also owns some $25 billion worth of preferred interest in two of AIG’s foreign life insurance units that must be monetized.

AIG also expects billions more to come in by the end of the year as it closes on the sale of American Life Insurance Co to MetLife Inc for $15.5 billion in cash and stock, and lists AIA Group in Hong Kong to raise an estimated $15 billion.

Miller said the stock component of the MetLife deal was an important asset, but “not one that we want to hang on to forever.”

“That would be a part of the package that would give the government exposure that’s diversified — not just AIG,” Miller said.

(Reporting by Paritosh Bansal in New York and David Lawder in Washington, additional reporting by Soyoung Kim; Editing by Robert MacMillan and Matthew Lewis)

By PAN PYLAS, AP Business Writer Pan Pylas, Ap Business Writer   – Fri Sep 17, 11:53 am ET

LONDON – Renewed fears about the pace of the U.S. economic recovery hit stocks Friday after a survey showed consumer sentiment fell to its lowest level in over a year.

The University of Michigan reported that its main consumer sentiment index slipped to 66.6 in September from August’s 68.9. The drop was unexpected — the consensus in the markets was that the index would rise modestly to 70. The long-run average is around 85

The data provided further evidence that the U.S. consumer is faltering amid mounting talk of a double-dip recession, especially as consumer spending accounts for around 70 percent of the world’s largest economy.

“The broader story is that the slow bleed in consumer sentiment appears to be continuing, probably because of an array of reports that this recovery is not generating nearly the same number of jobs as past recoveries,” said Alan Ruskin, an analyst at Deutsche Bank.

“Going into the weekend it looks like traders are willing to simply chop risk,” said Ruskin.

The impact in the markets was to turn modest gains into modest losses.

In Europe, the FTSE 100 index of leading British shares closed down 0.4 percent at 5,508.45 while Germany’s DAX fell 0.6 percent to 6,209.76. The CAC-40 in France was 0.3 percent lower at 3,722.02.

In the U.S., the Dow Jones industrial average was down 0.1 percent at 10,586.21 while the broader Standard & Poor’s 500 index was 0.1 percent higher at 1,126.07.

The figures were a disappointment for investors who had earlier marked up shares after positive earnings news from technology companies such as Oracle and BlackBerry maker Research in Motion helped shore up sentiment.

The technology sector is widely seen as a bellwether of the recovery, as companies’ and households’ demand rises as the economic outlook brightens.

Over the past week or so, stocks have rebounded as fears of a return to recession in the U.S. — the so-called ‘double-dip’ — have diminished after a run of solid economic data. However, the prevailing view is that the recovery will continue to be fairly subdued, possibly requiring further support from policymakers, both in government and at the U.S. Federal Reserve.

Figures showing that U.S. consumer prices rose 0.3 percent in August — roughly in line with expectations — had little impact on the markets on a day when trading was somewhat volatile, given that many futures and options contracts have to be settled in both Europe and the U.S.

The U.S. inflation data are unlikely to convince the Fed of the need to boost money supply by buying bonds from financial institutions.

“Today’s inflation report indicates that the Fed’s monetary policy is unlikely to change in the foreseeable future due to the absence of inflationary or deflationary pressures,” said Michael Woolfolk, an analyst at Bank of New York Mellon.

Earlier in Asia, Japan’s benchmark Nikkei 225 stock average gained 116.59 points, or 1.2 percent, to 9,626.09 as exporters continued to move higher in the wake of the Bank of Japan’s decision earlier this week to intervene directly in the currency markets to stem the export-sapping appreciation of the yen.

By mid afternoon London time, the dollar was down 0.1 percent at 85.74 yen, way up from the 82.87 yen 15-year low it was trading at before the intervention.

One side-effect of the intervention over the last couple of days has been a strengthening in the euro against the dollar. The euro was down 0.1 percent at $1.3046, having earlier hit a five week high of $1.3159.

Analysts said that Japan’s defense of its currency, its first intervention in six years, has made the euro a favorite bet with traders against the dollar.

Elsewhere in Asia, South Korea’s Kospi rose 0.9 percent to 1,827.35, Hong Kong’s Hang Seng added 1.3 percent to 21,970.86 and Australia’s S&P/ASX 200 advanced 0.7 percent to 4,638.90.

Benchmark crude for October delivery was down 76 cents at $73.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.45 to settle at $74.57 a barrel on Thursday.

____

Associated Press Writer Alex Kennedy in Singapore contributed to this report.

Sat Aug 14, 7:41 am ET

TOKYO (Reuters) – Japanese Prime Minister Naoto Kan said the yen’s sudden rise against the dollar had become a concern and he would continue to watch it carefully, Japanese media reported on Saturday.

Kan said it was yet to be decided how and when he would meet with Bank of Japan Governor Masaaki Shirakawa to discuss the recent surge in the yen, but added: “I want to be sure to communicate as necessary (with the Bank of Japan),” the Nikkei business daily reported on its website.

“It’s become a bit of a concern,” Kan said when asked about the sudden strengthening of the yen. “I want to continue watching it carefully in the future.”

Kan’s comments came after government sources said the prime minister and the central bank governor may meet as early as next week to discuss the yen’s strength and possible responses, although likely options are seen as limited.

The dollar stood around 86.20 yen, more than a yen above Wednesday’s 15-year low of 84.72, on the prospect that Japanese officials will increase verbal intervention to try to stem yen gains.

But traders said the yen was likely to gain longer term, because the Group of Seven countries are unlikely to agree to joint foreign exchange market intervention to strengthen their currencies as their own economies are not recovering strongly.

(Reporting by Shinichi Saoshiro; editing by Sue Thomas)

By Gabriel Madway Gabriel Madway   – 1 hr 20 mins ago

SAN FRANCISCO (Reuters) – Dell Inc (DELL.O) on Thursday agreed to pay $100 million to settle charges by market regulators that the computer maker used hidden payments from Intel Corp (INTC.O), and fraudulent accounting to make it appear that it was meeting analysts’ earnings targets.

The U.S. Securities and Exchange Commission alleged that Dell did not disclose large exclusivity payments it received from Intel to not use chips made by its main rival, Advanced Micro Devices Inc (AMD.N).

Those payments, “rather than the company’s management and operations,” allowed Dell to meet its earnings targets from 2002 through 2006, the SEC said. The charges were laid out in a stinging 61-page complaint.

Under the settlement, Dell Chief Executive Michael Dell, along with former CEO Kevin Rollins, each agreed to pay $4 million. Former Chief Financial Officer James Schneider agreed to pay $3 million.

Dell announced last month that it had set aside $100 million in its first fiscal quarter in preparation for a potential SEC settlement.

The company and Michael Dell entered into the settlements without admitting or denying the charges.

According to the SEC, Intel’s exclusivity payments to Dell grew considerably over the years, peaking at 76 percent of Dell’s operating income in the first quarter of fiscal 2007.

Without the Intel payments, Dell would have missed Wall Street’s earnings-per-share estimate in every quarter from 2002 through 2006, the SEC said.

Dell shares surged roughly 50 percent from 2002 to 2004.

Rather than disclose the benefits it received from Intel’s payments, Michael Dell, Rollins, Schneider and others in regulatory filings cited “cost reduction initiatives” and “declining component costs” as reasons for Dell’s increasing profit margins, the complaint said.

“Dell manipulated its accounting over an extended period to project financial results that the company wished it had achieved, but could not,” said Christopher Conte, associate director of the SEC’s Division of Enforcement, in a statement.

“Dell was only able to meet Wall Street targets consistently during this period by breaking the rules.”

Intel cut its payments after Dell announced plans to start using AMD chips, leading to a sharp drop in Dell’s operating results which the company blamed on demand and pricing, according to the SEC complaint.

Dell in a statement said the settlement does not include any restrictions on Michael Dell’s service as an officer or director of the company he founded.

“Dell’s board reaffirms its unanimous support for Michael Dell’s continued leadership,” said Sam Nunn, presiding director of the Dell board in a statement.

Intel spokesman Chuck Mulloy declined to comment on the settlement between the SEC and Dell, saying the company was not party to the agreement.

“Any characterization of Intel’s relationship with Dell have not been tested or adjudicated in any form …we’ve maintained all along that the relationship with Dell was not exclusive,” he said.

The original SEC probe into the accounting matters began in 2005 and Dell later acknowledged accounting errors and restated financial results from 2003-2007.

Shares of Round Rock, Texas-based Dell closed up 33 cents at $13.40 on the Nasdaq.

(Reporting by Gabriel Madway and Yinka Adegoke; Editing by Gary Hill, Bernard Orr)

By TALI ARBEL, AP Business Writer Tali Arbel, Ap Business Writer – Tue Jul 6, 12:17 pm ET

NEW YORK – The service sector grew more slowly in June, an industry trade group said Tuesday, offering the latest sign that the economic recovery is weakening as the second half of the year begins.

The Institute for Supply Management, a trade group of purchasing executives, said its index tracking service-oriented companies slid to 53.8 last month from 55.4 in May — the highest point since the recovery began.

A reading above 50 indicates expansion. June’s reading is well above the 37.2 low in November 2008. But it’s far below the pre-recession high of 67.7 in 2004.

The index was broadened in January 2008 to consider four areas of information: business activity, employment, supplier deliveries and new orders. Before that, it only looked at business activity.

A robust service sector, which accounts for about 80 percent of U.S. employment, is crucial to keeping the economy expanding and adding jobs. Service-oriented jobs include those in hospitals, shops, restaurants, airlines, schools, construction, banks and consulting firms, among others.

The dip in the non-manufacturing index follows last week’s raft of economic data that points to a slowing recovery. For the second straight month, private-sector job creation was weak. The number of people seeking unemployment benefits is on the rise, a sign that layoffs have yet to ebb. Home sales are plunging and factory orders are down.

Still, the decline in service-sector growth didn’t interrupt a rally on Wall Street. The Dow Jones industrial average rose 136 points in early trading.

But it may force some economists to revise their expectations for growth in the second half of the year.

“Everyone is kind of pausing, looking at the landscape, not quite throwing in the towel yet,” said Pierre Ellis of Decision Economics. The index’s slowing growth in June is “the first sign of potential problems.” He expects economic growth in the second half to slow to 2.5 percent. The economy grew 2.7 percent during the first quarter.

One troubling sign from the service-sector report is a decline in new orders, which signal future business. While still growing, they fell in June to their lowest level since December.

These businesses mainly depend on shoppers. Consumers have increased purchases only moderately, about 2 to 3 percent in the second quarter, said research firm Capital Economics. High unemployment, a still-rocky housing sector and volatile stock markets are weighing on people’s desire to spend.

ISM also says hiring plans dipped in June after growing in May for the first time in 28 months.

The employment index dropped 49.7 last month from 50.4 in May. The sluggish rebound in hiring plans of service companies mirrors the slow pace of private-sector hiring seen in the government’s jobs report. Companies added only 83,000 jobs in June, much fewer than the 200,000 new jobs needed each month to bring down the unemployment rate.

The slowdown in growth in June was partly due to weaker demand from abroad because of Europe’s economic crisis, said Paul Ashworth, an economist with Toronto Capital Economics. New orders for exports shrank for the first month since February.

Of the 18 industries surveyed, 15 said they were growing. They were led by real estate and arts and entertainment. The finance and insurance sector and “other services,” a collection of smaller industries, said they were shrinking; educational services grew at the same pace in June.

Signals from companies are mixed. Many retailers had a better first quarter compared with a year ago, including Christopher & Banks Corp. The women’s clothing seller said on June 30 that it got a big boost in net income from stronger sales of full-priced items.