AIG may absorb $5-b investment losses
Washington: American International Group (AIG) plans to absorb losses for a dozen insurance units after their securities-lending accounts suffered $13 billion of writedowns tied to the subprime-mortgage collapse during the past year.
By Bloomberg |
Washington: American International Group (AIG) plans to absorb losses for a dozen insurance units after their securities-lending accounts suffered $13 billion of writedowns tied to the subprime-mortgage collapse during the past year. AIG will assume $5 billion losses on sales of the investments, up from a previous commitment of $500 million, said Christopher Swift, vice-president for life and retirement services, in an interview. AIG also will inject an undisclosed amount of capital into some of the subsidiaries, he said.
Moody���s Investors Service and AM Best both cited the writedowns in May when they downgraded New York-based AIG���s credit ratings. State regulators in Texas said they didn���t know AIG was investing cash collateral from the securities-lending business in subprime-linked assets and were concerned the insurance units hadn���t put aside enough capital to cover potential losses.
���We were aware of this portfolio, but we didn���t have transparency on what was in it because it was off-balance sheet,��� said Doug Slape, chief analyst at the Texas Department of Insurance in Austin, which oversees three AIG insurers that have suffered about 60% of the writedowns. The reduction of asset values in the securities-lending portfolio was part of the $38 billion in pre-tax writedowns that AIG reported during the past three quarters. That total included reductions of $20 billion on guarantees and $18 billion on mortgage and asset-backed securities, including some tied to subprime home loans.
Moody���s Investors Service and AM Best both cited the writedowns in May when they downgraded New York-based AIG���s credit ratings. State regulators in Texas said they didn���t know AIG was investing cash collateral from the securities-lending business in subprime-linked assets and were concerned the insurance units hadn���t put aside enough capital to cover potential losses.
���We were aware of this portfolio, but we didn���t have transparency on what was in it because it was off-balance sheet,��� said Doug Slape, chief analyst at the Texas Department of Insurance in Austin, which oversees three AIG insurers that have suffered about 60% of the writedowns. The reduction of asset values in the securities-lending portfolio was part of the $38 billion in pre-tax writedowns that AIG reported during the past three quarters. That total included reductions of $20 billion on guarantees and $18 billion on mortgage and asset-backed securities, including some tied to subprime home loans.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
