Today the fight continues for survival by AIG, the nations largest life insurance conglomerate.
The outcome is still uncertain as of the time of this blog post, but the push to calm nervous policyholders of it's life subsidiaries has started to go full speed as they look to avert an unwarranted run of redemption's on the life insurance side and policy cancellations on the P&C side of the business.
Yesterday the rating agencies did what was the once unthinkable and lowered AIG's general S&P rating to A- from what long ago was a AAA rating, with the AM Best rating going to A. This is going to have huge repercussions in the settlement business as AIG for decades has been able to call the shots and enforce it's will on the claims and settlement process due to their size, scope, exclusive broker arrangements and creation of approved lists of markets based on size and rating criteria.
Here is my take as of close of business EST today on the AIG situation:
1. Former AIG Chairman Maurice "Hank" Greenberg sent an open letter to the management of AIG restating his offer to assist the company and wondering why they have rebuffed his offer to assist. If anyone knows how to right the ship at AIG it would have been Greenberg, the man who built it over 35 years, but the shadow cast by his departure is obviously more then the current management can handle. I do believe the markets would welcome the return of Greenberg but there is no way it's going to happen. You can access a copy of the letter by clicking here.
2. The talk of a private sector bail out is just about dead at this time. Lets face it, what lender or entity currently has the necessary capital to stave off the cash calls required of the AIG at this time? It could be potential suicide for a private lender or lender group and they would frankly be better off waiting until the company is forced into liquidation to get the parts they want at a discount rather then trying to keep AIG whole.
3. Talk of a federal solution is back on the table as reported by CNBC about 2 hours ago. The only way I see this happening is if AIG and it's lobby group can convince the Fed that this would be a Chrysler type loan, used as a special purpose to keep the ship afloat while management unwinds its mess and sells off assets, with the funds eventually being repaid to the tax payers. In any event I don't think there is any way AIG continues business in it's current form, major asset sales and restructuring will be forced upon them by the terms of the Fed loan if it occurs.
4. The NY State approval of AIG to tap $20 billion in assets from it's various subsidiaries via a loan is contingent upon them putting together a larger financing plan that doesn't put the assets at risk. Basically there is a multi-faceted rescue plan at work here that is hinged upon AIG getting close to $50 billion from some outside source in short term capital to ride out this immediate crisis and embark on what will turn out to be a major restructuring of the entire company.
5. The life markets will likely emerge secure and will certainly end up in the hands of another market no matter what the outcome of AIG. Life companies are hard to screw up these days given the restrictions on the assets they can hold and risks they can take. A lot of reforms were implemented after Executive Life and Confederation Life went down in the early 1990s that have made it pretty hard for even the most inept management to screw up the solvency of the firm.
Of course the great irony in all this is that AIG, that for so long enforced it's will upon the insurance and legal world through it's size, attitude and business tactics is now in a position where many of the requirments that they created to develop approved lists of settlement companies, they are in fact unable to meet.
How strange to say that AIG doesn't meet MY requirements or most other life company standards to write structured settlement annuities. The settlement world has changed as we knew it and the end of this story is still being written.
