The Federal Reserve Bank of New York and American International Group Inc. agreed to shoulder as much as $450 million in losses tied to the insurer's Japan real estate bets as part of its sale of a division to MetLife Inc.
MetLife won an accord to split most declines in value on $1 billion in commercial mortgages included in the $15.5 billion purchase of the AIG unit, American Life Insurance Co., according to a MetLife regulatory filing and the company's chief financial officer.
A corporate vehicle owned by the Fed and New York-based AIG is to use MetLife stock gained in the sale to pay for future real estate losses, which will erode the assets left to repay taxpayers, said people familiar with the arrangement.
The New York Fed agreed to the loss-sharing deal because it expects to be repaid for its $9 billion investment in the Alico vehicle, said one of the people familiar with the regulator's discussions.
