AIG Announces Possible Sales
AIG announced on Friday it may sell its North American life subsidiaries, including American General, as part of its plan to repay an $85 billion bailout loan from the U.S. government. American General is AIG's primary issuer of structured settlement annuities.
According to AIG's Chairman Edward Liddy, the proposed sale would allow AIG to re-focus "on our traditional strengths in property and casualty underwriting” as well as AIG's foreign general insurance businesses.
Liddy also announced on Friday that AIG has already borrowed $61 billion of the $85 billion emergency bridge loan it received less than two weeks ago from the Federal Reserve. In a conference call with financial analysts, Liddy reported AIG has utilized $54 billion of the loan to strengthen AIG Financial Products, its London-based
structured-finance unit, as well as its securities lending business. The remainder of the $61 billion has supported AIG's daily business operations.
The financial rating agencies reacted negatively to the AIG announcement. Standard & Poor’s changed its review status of AIG to “negative” from “developing.” A.M. Best Co. said it was maintaining AIG's “under review negative” status.
A Standard & Poor's representative stated: “This has caused the scope of the planned
business sales to exceed our expectations.” Standard & Poor's, however, continues to assign an A+ financial strength rating to most of AIG’s insurance operating
subsidiaries. According to Standard & Poor's, AIG's subsidiaries face investment risk although they continue to exhibit strong competitive positions,
earnings, and capital levels.
Despite continuing assurances from AIG and state insurance regulators, the National Underwriter has reported that several banks have "temporarily suspended" sales of AIG annuities.
AIG is in the news today for spending almost half a million dollars on a meeting after they had been approved for the bailout. This has generated a bunch of popular sentiment (all negative) about excess.
AIG issued a press release about this event, which I'll quote here.
AIG Clarifies Agent Meeting
Last update: 12:26 p.m. EDT Oct. 8, 2008
NEW YORK, Oct 08, 2008 (BUSINESS WIRE) -- American International Group, Inc. (AIG) Chairman and Chief Executive Officer Edward M. Liddy sent a letter today to U.S. Treasury Secretary Henry M. Paulson to clarify the circumstances of a business event held by an AIG subsidiary which was discussed during an October 7, 2008 hearing by the House Committee on Oversight and Government Reform.
The event, mischaracterized as an "Executive Retreat," was held by one of AIG's insurance subsidiaries for independent life insurance agents, not for AIG employees. These agents were top business producers for the company, and of the more than 100 attendees, only 10 were employees of the AIG subsidiary who were there to represent their company. No AIG executives from headquarters attended. The meeting was planned months before the Federal Reserve Bank of New York's loan to AIG.
Posted by: Edward Vielmetti | October 08, 2008 at 03:01 PM
Saturday Night Live ran a skit (in a special Thursday edition) regarding the AIG event.
http://www.nbc.com/Saturday_Night_Live/video/clips/update-thursday-part-2/742141/
I'm guessing that's the first mention of AIG on SNL.
Posted by: Edward Vielmetti | October 10, 2008 at 11:42 AM