AIG head retires following $11.1bn write down

by Gill Montia

Story link: AIG head retires following $11.1bn write down

American International Group (AIG), the world’s largest insurer, has announced that its head of its financial products, Joe Cassano, will retire at the end of March.

The news comes after the company posted the biggest loss in its 89-year history, with 2007 profit falling to $6.2 billion, from $14 billion in 2006.

The group was forced to write down $11.1 billion on credit default swaps, whereby it guaranteed the credit worthiness of certain securities.

Last August, AIG suggested that its exposure to the sub-prime crisis was minimal but in January the group admitted that writedowns on sub-prime mortgage investments would be higher than expected after its auditors, PricewaterhouseCoopers, found a “material weakness” in the way the company valued its credit swaps.

Mr Cassano will stay on as a consultant at AIG until the end of the year and will be replaced temporarily by William Dooley, a senior vice-president of the insurer’s financial services businesses.

Meanwhile, UBS has predicted that losses resulting from the turmoil in the global financial markets could reach $600 billion.

The investment bank is forecasting that banks and brokers will be responsible for more than half of the total writedown.

A note issued by the bank at the end of last week stated: “Our global banks team estimates total industry losses in this financial crisis should reach north of $600 million, of which listed banks and brokers should account for ‘only’ $350 billion.”