American International Group Inc., parent company of the largest of the U.S.-based commercial insurance carriers, reported a record losses and a major restructuring that is marked by continued aid from the U.S. government.
Citing what it characterized as "severe credit market deterioration," particularly in commercial mortgage-backed securities; AIG reported a net loss for the fourth quarter of 2008 of $61.7 billion and a net loss for all of 2008 of $99.29 billion, both of which are record losses for the company.
The restructuring and market disruption-related charges that AIG reported included $21 billion for tax benefits not obtained for losses in the fourth quarter.
AIG also announced that it was forming a new commercial insurance unit headed by Kristian Moore, the current president and CEO of the AIG Property Casualty Group. To be known as AIU Holdings Inc. the new unit will be comprised of AIG's Commercial Insurance Group, its Foreign General Unit, and what the company described as "other property and casualty operations."
John Doyle, currently the president and CEO of AIG Commercial Insurance, will assist in the formation of AIU Holdings by taking over responsibility for the Domestic Personal Lines division, the company announced.
"AIG is executing one of the most extensive corporate restructuring programs in history," said Edward Liddy, AIG's chairman and chief executive officer since September.
In a continuing effort to stabilize AIG's liquidity, the U.S. Treasury and Federal Reserve announced they were providing AIG with an additional $30 billion.
But Liddy stressed that the $30 billion that the government is making available to AIG is not a cash infusion and that the company is not burning through cash, despite its massive mark-to-market losses.
Liddy said the company still has access to $20 billion of a $60 billion credit facility the government made available to it earlier.
"The balance on that outstanding government facility has been in the $36 billion to $38 billion range now for the better part of eight, 10 or 12 weeks, indicating that our liquidity issue has in fact been stabilized," Liddy said.
Other debt-reduction measures include the creation of two special purpose vehicles that will house assets of AIG's life insurance companies, the American International Assurance Co. and American Life Insurance Co., which will allow the New York Fed to receive better interest payments.
The special purpose vehicles will also allow AIG to reduce by $26 billion the amount it owes the Federal Reserve Bank of New York for previous loans provided in the effort to keep the company solvent. Although the divestiture of some of AIG's operations remains a possibility as the company seeks to raise capital, the severe global economic downturn is also impacting that effort, the company said
The U.S. Treasury and the Federal Reserve issued a press release last month that stated in part: "The U.S. government is committed to continuing to work with AIG to maintain its ability to meet its obligations as they come due."
--Compiled by staff from news and wire reports.
April 15, 2009
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