US government’s AIG loan keeps rising

by David Masters

Story link: US government’s AIG loan keeps rising

Struggling US-based insurer American International Group (AIG) has warned that its $120 billion loan from the US government may not be enough.

The warning came as two new executives were appointed to oversee the restructure of the company.

AIG has already spent $90 billion of the rescue package, and CEO Edward Liddy believes that more than the remaining $30 billion could be needed to ensure the company’s survival.

Liddy, appointed by the US government last month to run AIG, said whether or not the money is enough depends on two key factors.

Firstly, the company must sharpen its ability to prevent bleeding in its financial products.

Secondly, AIG must rid itself of its most volatile liabilities to prevent future write downs.

Liddy’s stance represents a stark turnaround from 18th September when he told AIG’s employees that $85 billion was a ‘really big number’.

On 3rd October, his wording changed slightly when Liddy said he wasn’t confident enough to assure analysts that the company would ‘never’ need another injection from the government.

Two new executives have been appointed to the AIG to lead the company through the restructuring that will prevent further losses.

Paula Rosput Reynolds, formerly chief executive at US insurer Safeco, has been appointed as chief restructuring officer.

She will oversee asset divestiture and will be the company’s key point of liaison with the Federal Reserve Bank of New York.

Richard Booth, chief administrative officer at AIG, will be put in charge of transition planning.

Booth will work out how best to separate the companies that AIG sells off.