US insurer calls off all seasonal celebrations after luxury event slammed.

See analysis: Seasonal fear

The beleaguered insurer AIG has cancelled Christmas, to the outrage of its long-suffering employees.

Staff were furious to hear their seasonal celebrations had been called off following the US government’s nationalisation of the world’s largest insurer.

One source said: “Everyone feels they have worked so hard and taken so much over the past few weeks – and this is the thanks they get.”

A spokesman for AIG UK confirmed that staff Christmas parties had been cancelled as part of a wider policy to stop all non-essential entertaining.

The policy was introduced following a furore on both sides of the Atlantic over an expensive luxury retreat hosted by AIG just days after the US government had bailed out the insurer with $85bn (£50bn). The Federal Reserve has since given AIG another $37bn.

Ed Liddy, AIG’s chief executive, wrote to Henry Paulson, the US Treasury secretary, on 8 October to explain the retreat and assure the government there would be no non-essential expenses.

The letter said: “The event in question was held by one of AIG’s insurance subsidiaries for independent life insurance agents – not for AIG employees – who were top business producers for the company. The vast majority of the attendees were independent business people and their guests, not AIG employees. Indeed, of the more than 100 attendees, only 10 were employees of one of our insurance subsidiaries who attended to represent their company. Not a single corporate executive from AIG headquarters attended.”

Liddy added: “Let me assure you that we are re-evaluating the costs of all aspects of our operations in light of the new circumstances in which we are all operating.”