Archive for the ‘AIG’ Category

Sully Rulz

Sully Rulz

Anyone remember the heroes on US Airways 1549 that crashed into the Hudson? Well, AIG has managed to screw up their involvement in that, too. They’re denying liability.

When a homeowner has a burglary or a driver has a crash, all it normally takes is a call to the insurance company and a description of the loss to activate the policy. But aviation liability insurance is different. It is activated by a finding of negligence on the part of an airline. If there is no negligence, then arguably there is no liability, and no obligation to pay claims.

For those of us who take immense pleasure in AIG’s cascade of fail, this is a delight. I’m picturing the following sequence of events:

1. Some Senator calls up Liddy and widens his poop shoot yet further (“these people are heroes!”)

2. Liddy calls up his claims department and says: “pay the fucking claims and call back the NYT, you FUCKING moron”

3. Liddy calls up the same claims exec the next day: “oh, and you’re fired”

4. Liddy gets summoned to the Hill again so the polititians can fall all over each other to play the righteous outrage card a bit, which will be a welcome break from the befuddled economic architect hand they’ve been making  a hack job of lately.


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Towel. Throw

I am an Idiot

I feel lik an Idiot


Liddy’s falling on his sword.

Quote of the day from analyst Robert Haines:

“It really is a terrible job. I’m not sure who would want it” 

Ha ha.

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Crowded Field


Who wants capital? (SG-I'm so funny!)

Move over, AIG.

The Hartford, one of the most venerable insurers in the US market, are seeking bids for its property insurance business, Bloomberg has reported.

Great time to have a load of capital to invest in some underpriced assets (what? heard that before recently? ).

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Breaking Up is Hard to do

By the Hammer of Geithner

By the Hammer of Geithner

Pieces of AIG are continuing to fall off the truck and we’re getting a little more news into what’s going to be left.

Obviously, we start with the main insurance operations:

AIG is to accelerate steps to position its general insurance business AIU Holdings as an independent entity by transferring the company to a special purpose vehicle in preparation for the potential sale of a minority stake in the business, which ultimately may include a public offering of shares, depending on market conditions.

One thing I hadn’t fully appreciated was the scale of the company, 30bn in premium! What a beast. I wonder what we’ll wind up with once this is all over?

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Stick ’em Up

Go Ahead, Make My Day

I'm gonna blow the hair off your head

I’ve been wanting to do an AIG roundup, so here it is.

AIG has released a supposedly confidential document (H/T CalculatedRisk) that lists out all the things that AIG does and tries to give a flavour for all the various exposures different companies have to it.

It looks like it’s supposed to work like a mob boss asking a reluctant extorion victim, “So, how’s your wife and kids?”, the implication being that he has the guy by the balls.

AIG is trying to make the case that it is some kind of near-monopoly and its failure is armageddon. But it is not; at least, in insurance it is not. The insurance industry is going to be fine and every executive worth worth a damn is itching to write the bejesus out of the market as soon as AIG gets ITS balls clipped by unkie Sam.

Speaking of those executives, they’re coming out and slamming AIG publicly.

First, there’s Brit (HT: ReinsuranceGuru)

He added that AIG – which has a large UK presence – was “haemorrhaging teams of people” but still winning business. “In order to win business they are offering premiums so low they are unsustainable,” he said.

And Liberty Mutual‘s Ted Kelly

In a conference call to address Liberty Mutual’s fourth-quarter earnings, Kelly said the federal money given to American International Group Inc. gave it an unfair advantage, allowing the struggling enterprise to be “overly aggressive.”

I think that one or two of these guys are going to really start cranking out the public statements because AIG is very sensitive to publicity and they’re possibly more ready to swipe AIG’s lunch than they were 9 months ago. Shareholders of insurers are going to make a killing at some point because of this.

Lastly, for the geeks out there, there’s a great post at a new blog on credit trading that goes through AIG’s strategy, describing it as being a nice combination of arrogance and regulatory mismanagement. 

My big question after this whole mess subsides is: what’s going to happen with the rating agencies?

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Well, I think we’re finally (finally!) witnessing the beginning of the end. The end could last awhile, though.

There’s loads of press today on AIG (try here and here and here and follow the links).

I’m just going to go with the basic premise that the company is basically toast. It’s started selling life assets to the government that it couldn’t sell on the open market. I’m willing to bet that this isn’t the last time AIG tries this; what choice does the UST have? They own the assets, they might as well take the profits from them.

I’m also willing to bet that the government becomes fed up with bailing AIG out before it is able to restore its reputation as on ongoing concern to good standing. Eventually, the insurance business is going into runoff and the financial products crap is going to wind up either going into or becoming of its own accord a bad bank.

There just isn’t any other endgame. If it happens slowly enough, you’re looking at a massive transfer of wealth from the US Government to the US insurance market. If it happens faster, you wind up with financial catastrophe (it’s happened elsewhere).

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Is this the death spiral?

American International Group Inc. may scrap a plan to repay a $60 billion
U.S. government loan by selling businesses, after failing to find enough
promising bidders, said two people with knowledge of the matter.

AIG is proposing additional ways to reduce the company’s debt to the
U.S., including handing over stakes in some operations directly to the
government, a person said.

That’s not going to work. I fear that this company is actually worthless – it’s stock sure is trading like it is. Felix is right that its failure would make Lehman look like a sneeze, but what is the right strategy?

If they wither and die, they’re going to take down a chunck of the insurance market with them by buying their renewals and crushing the industry’s profits.

If they go bust it’s armageddon.

I think the government should just force AIG to buy a ton of reinsurance. Risk management problems go away and you can give back a pile of mony to the government.

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