Disability Law

AIG Announces Possible Sales

By Patrick Hindert

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.

Full post as published by Beyond Structured Settlements on October 05, 2008 (boomark / email).