Chillin' out till it needs to be funded
AIG’s asian unit AIA which consolidated most of its international units in life insurance, got sold for $35.5 billion to Prudential of Asia ( UK’s larger insurance and funds company) leaving it in better hands for the eventual going public option that was quite a liability in this regard for AIG unable to take the $10 bn IPO for more than a year and a half. It recently changed its payback calendar as well after it could not show much capabilities as an insurer in the latest results. It will soon diversify into legal from the looks of it…the last $25 billion was to be repaid in a first tranche of $8.5 billion from securitised life insurance assets. The securitisation finally got to a financial underwriter and was scrapped before it reached the Fed / Treasury accounts.
It really doesn’t make much sense for anyone to stick with this fuddy duddy! Its prized constitution as Maurice Greenberg’s prize was its tight control on what it charged when it had to repay…How much would it raise premiums now to recoup General and P&C losses! The Fixed Income portfolio of $560 billion is also likely to lose money for some more time. They are also not invested in new equity from 2008 and 2009 where they could have made a cash profit in that asset class…
The American International Group said on Friday that it lost about $11 billion last year, surprising analysts and showing the long-term risks inherent in the types of large, complex insurance coverage that the company once pioneered.
To increase its reserves to pay future claims, the company set aside $2.7 billion on a pretax basis, accounting for a big portion of its loss.
This indicates that A.I.G. is experiencing significantly larger claims than it expected when it sold the insurance, most of it more than seven years ago, long before its government rescue in late 2008.
Fitch Ratings responded by putting the company’s property and casualty subsidiaries on a negative watch for their financial strength ratings. Financial strength ratings are indicators of an insurer’s ability to pay claims, and are separate from credit ratings.
With Moody’s getting flak from UBS, Fitch is next in line for not timely responding to credit detetrioration in 2008. When would the Volcker’s clean up their act and get here. And who will regulate AIG next?
This behemoth brought down the entire Financial system, never paid credit default claims and is bleeding from its own miscalculations despite charging hefty profitable premiums an single handedly controlling its Reinsurance and its brokers apart from its own insurance risks…
Treasury Secretary Timothy Geithner testifies before a House Oversight and Government Reform Committee Hearing focusing on factors affecting efforts to limit payments to AIG on Capitol Hill January 27, 2010 in Washington, DC. Geithner denied he played a role in withholding information about deals that sent billions of taxpayer dollars from the bailout of American International Group Inc. to big banks. (Photo by Ann Heisenfelt/Getty Images)
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