New York, March 1: The colossal bailout package provided to the American International Group Inc (NYSE:AIG) by the U.S. government barely six months back has not put the insurance behemoth back on track. Six months on, AIG is precariously placed, and is in need of more succor.
The New York based insurer has not been able to stem its stream of losses. There are no buyers out there for some of AIG’s prime assets, which only add to its woes. AIG’s endeavor has been to sell off its assets and repay its debts. So far, its attempts have not yielded results.
Donn Vickrey, an analyst with Gradient Analytics Inc said of the potential purchase, "If companies actually have cash, or the ability to make a purchase, they are not jumping on AIG right now. The prudent thing for (companies) to do is just say 'no' at this point unless it's just an insanely cheap price."
AIG, like Citigroup, is considered too big and too important to fail. Russell Walker, a risk management professor at Northwestern University in Chicago, opined, "If the government lets AIG fail, I think you are going to see an enormous sort of shock wave across all industries because AIG had their finger in a lot of different areas."
It is, therefore quite likely that AIG will get another helping hand from Uncle Sam. Sources close to the matter revealed that the government will augment its present four-fifth stake in AIG by swapping it with larger chunks in three units of AIG.
These three units, i.e., AIG's Asian operations, International life insurance business and U.S. personal lines business are likely to be split off from the company. Another unit, which will shoulder the burden of AIG’s other businesses and troubled assets, is expected to be created and sold off in pieces.
AIG spokeswoman Christina Pretto said of the probable options that the company and the government were looking at, “We continue to work with the U.S. government to evaluate potential new alternatives for addressing AIG's financial challenges. We will provide a complete update when we report financial results in the near future."
AIG has confirmed that it will report its fourth-quarter earnings Monday wherein it is expected to report a $60 billion fourth-quarter loss. Another reason for the company to ask for further aid from the government.
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