Monday, September 15, 2008

AIG Failing

AIG, the world's largest insurer, will address Wall Street on Monday to allay fears about its future in a move that could involve the company using large asset sales to raise capital.

AIG's shares lost a third of their value in trading in New York on Friday after Standard & Poor's threatened to downgrade its debt. Robert Willumstad, the chief executive of AIG, is already scheduled to publish a trading statement for the insurer today. He is also expected to host a conference call for analysts before the stock market opens. Many Wall Street experts anticipate that he will unveil the sale of some of the insurer's businesses.

The insurer has already confirmed that it has hired JPMorgan Chase to advise on a refinancing package. AIG has a handful of lucrative businesses that it could sell to raise emergency funds, including its life insurance and casualty insurance operations, its consumer lending business and an aircraft-leasing unit.

Credit rating agencies have become anxious about the prospects for AIG, which has posted $18 billion (£10 billion) of losses over the past three quarters. It is feared that the insurer will become trapped (as its shares and debt decline, rating agencies are more likely to cut their rating) and force AIG to raise new money. As its share price declines, Mr Willumstad would find it more difficult to raise funds.

Shares in AIG have fallen by 79 per cent over the year as a whole. On Friday, the shares closed at $12.14, valuing the group at around $32 billion.

Source - Times Online


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