In what is now becoming an almost daily update on AIG and it's constantly changing situation and profile in the news I now have some positive news for those who are involved with or work for the AIG structured settlement division.
Rick Woolams, Chief Claims officer for AIG Commercial Insurance sent a memo out to all AIGCI staff to address the concerns about whether or not AIG will retain a structured settlement arm or process in the event of a sale of American General or other life markets. In that memo he stated the following:"AIG Chairman and CEO Ed Liddy announced AIG’s intent to focus the company on its core property and casualty insurance businesses, while entertaining the opportunity to sell several attractive businesses, including possibly AIG American General. These sales will generate the funds needed to repay the outstanding debt taken from the Federal Reserve Bank of New York. Many of you have asked about the impact of the potential sale of AIG American General on the structured settlement process. We don't anticipate changes to the current process. Our desire to offer a structured settlement as a settlement option has not been altered by recent events. The current approach in which both sides participate in negotiating periodic payments matched to needs promotes a resolution of the basis of fair compensation to the claimant and cost efficiency to the defense and the tort system. AIG American General remains a first option annuity provider and along with the other approved providers is part of a quality offer that is capable of meeting the needs of any claimant that elects to explore a structured settlement option. In essence, it will be business as usual. AIGCI will continue to have a dedicated structured settlements department that will work closely with you in the claims resolution process to maximize benefits to all involved. We will continue to handle large claims volumes (over 455,000 in 2007), make significant claims payments (over $73 million dollars in claims paid each business day) and offer structured settlement when it is appropriate to do so.
What will happen if there is such a sale? We will continue to attach great importance to our policyholders and to the relationships built in serving them. We will continue to offer premier, value-added service and support and we will continue to identify opportunities in the claims process to offer structured settlement solutions."
Obviously, very comforting to hear for those working with and at AIG in the structured settlement area and I commend Mr. Woolams for getting this out there. There has been a tremendous amount of uncertainty in the market, speculation on what the sale of AIG units could mean to the structured settlement community and what the business imperative would be for AIG commercial lines to keep a structured settlement unit. I know I have done plenty of speculating myself, largely on the premise that the loss of life markets would remove a substantial business purpose for a casualty company to retain a coordinated structured settlement program such as AIG has run for the last 20 years. I think it was an important step and statement by AIG leadership to get accurate information and a clearly stated position out to it's stakeholders so we can at least discuss the intent of AIG, even if no one really knows just yet what the final form of AIG is actually going to end up looking like.
My concern, as yesterdays commentary illustrated, is that once the US Government was let into the AIG house with the $85 billion infusion and now today news of an additional $35 billion of credit, the fate of AIG was removed from the hands of it's management and put into the hands of politicians. As the Congressional hearings illustrated, and a glance at todays headlines which are filled with stories of the $35 billion infusion, another big sales conference and other issues, AIG is up on the radar screen of the media and politicians. That is a very, very bad thing for any company in that it looks as if it is becoming the poster child of the credit bust and can't get out of the headlines. The purpose of yesterdays credit extension was to avoid the need to engage in fire sales so that tax payer return on the $85 billion can be maximized, but my question remains as to how exactly AIG is going to sell $85 billion in assets and retain it's essential core in a market where it's logical buyers are cash strapped as well.
Time will tell but this was a welcome clarification for those of us in the structured settlement industry.