Stricken insurer faces yet more problems.
Another day, another AIG disaster. This time the stricken insurer is at the centre of a financial manipulation scheme which cost its shareholders at least $544m, a judge ruled.
It leaves four former executives at General Re and one former AIG executive, convicted earlier in the year, facing prison sentences between 14 and 17 years because of the scale of the crime.
Although it is yet another blow to the heavily tarnished reputation of the once great American insurer, it is nothing more than an unfortunate sideshow.
The real question now on everyone’s lips is: can AIG really pay back the huge sums it owes to the Federal Reserve?
Eyebrows were raised when in addition to the $85bn lending facility, the Fed loaned AIG another 37.8bn last month.
Questions have been asked about how AIG can burn through so much cash in such little time.
Now AIG has tapped into the Fed’s commercial paper program and can access up to $20.9bn, in order to pay off in the short-term some of its debts to the Fed.
Seems strange? Taking from Peter to pay … Peter. It might at least give AIG more time to sell-off its assets.
But the problem here is that AIG is being thrust into a declining market. If it has to sell at fire sale prices to quickly appease a US Government keen to assuage angry taxpayers, it may never fully repay its debts.
Despite this, the word from AIG’s clients and partners is that it is largely business as usual and there is still some respect for the ailing giant.
Certainly its demise offers potential opportunity for the Lloyd’s market.
One AIG area they might exploit is excess and surplus, in which policyholders go beyond their primary insurer to other companies to top-up the maximum claim payout.
The ratings downgrades AIG has suffered may make companies nervous and look to the more traditional expertise of Lloyd’s.
Other interested UK companies include Prudential, which is eyeing AIG’s Asian interests.
Watch this space.