AIG Doesn't Care How Much Money It Owes You

AIG's Declaration of Independence

The botched Prudential deal may not be another blow to the crippled, government-supported insurance giant as much as a sign of a tenacious new board motivated to save the company. So sit tight, taxpayers, getting your money back could take a while

American International Group's (AIG) $35.5 billion deal to sell the AIA Group, its main Asian insurance operation, to Prudential Plc (PUK) of the U.K. collapsed on May 31 when the insurer's board refused to cut the price. The sale was seen as critical to the firm's ability to begin repaying the U.S. government's $182.3 billion bailout, and its failure was a setback for CEO Robert Benmosche, who had agreed to a lower price, only to be overruled by his board.

Bruce Berkowitz, however, was delighted.

AIG may have become synonymous with recklessness and the global economy's near-death experience in 2008, but for Berkowitz it's pure gold, and the company's luster only grew brighter with the failure to sell AIA—no matter how many headaches it causes the government. For months, says Berkowitz, who manages the $16.5 billion Fairholme Fund, he spent six hours a day studying the battered insurer and bought more than 30 million shares. He now ranks as the largest private holder of the company's stock. Only the U.S. Treasury, which has a nearly 80 percent stake, owns more. The government just wants its money back; Berkowitz says he expects to double his.

"I've got the greatest analysts in the world working for me," says the Miami-based investor, who in January was named stock manager of the decade by Morningstar (MORN). "There's the GAO, the New York Fed, the Treasury, Congress, all the advisers they've hired. And guess what, they're working for me for free. I mean, I don't think people appreciate what the government has put into this. If I'm wrong I don't deserve to be in business."

GO HERE to read more.