AIG changes payback strategy - report

By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- AIG has reportedly changed its plans for restructuring its insurance business and its strategy for paying back the $70 billion it still owes taxpayers.

The troubled insurer is no longer planning to spin off its property-casualty insurance business, recently renamed "Chartis," through an initial public offering, according to Reuters. AIG had never fully committed to a Chartis IPO, but the troubled insurer put the possibility on the table March 2 as a way to raise money to repay government loans.

AIG declined to comment.

Chartis was technically separated from AIG and became its own company on July 27, though it remains 100% owned by its embattled parent company.

The separated property-casualty business is made up of the three former AIG units: commercial insurance, foreign general insurance and private client group. They pay a combined $71 million in claims every day, on average, and had $32.1 billion in cash on hand to pay claims at the end of 2008. Though AIG lost nearly $100 billion in 2008, Chartis was profitable, with an operating income of $3.3 billion worldwide.

AIG's former Chief Executive Edward Liddy had wanted to separate AIG's insurance units, since they had been adversely affected by the weight of the parent company's still-sizeable portfolio of troubled assets. The AIG name has become synonymous with the economic downfall, and the company and its major stakeholders -- including the U.S. government -- had believed a separation was necessary.

But AIG's new CEO Robert Benmosche has said that he wants to hold on to AIG's core assets while focusing on selling off less important units to pay back the government. Benmosche has said holding onto core assets will maximize the company's value.

Earlier this month, AIG wiped out $25 billion of its debt to taxpayers by selling stakes in two foreign life insurance subsidiaries to the New York Federal Reserve. The company has also fared better recently, posting two profitable quarters in a row, aided by a recovery in the value of its asset portfolio, although its underlying insurance business remained weak.

The government, which has given AIG a bailout worth up to $181 billion, believed the separation of AIG's property and casualty business would help to maximize the value of the insurance business. When AIG announced its plans in March, the New York Federal Reserve said the separation was "in the best interests of the American taxpayers" and placed AIG's "key business units in the best position to optimize their operations."

In July, AIG spokeswoman Christina Pretto, said AIG was positioning Chartis to be more independent down the road, even working to assemble an independent board for the company. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,487.33 -191.37 -1.08%
Nasdaq 4,718.50 -53.26 -1.12%
S&P 500 2,042.06 -15.03 -0.73%
Treasuries 1.82 -0.01 -0.44%
Data as of 2:53pm ET
Company Price Change % Change
Microsoft Corp 42.95 -4.06 -8.64%
Bank of America Corp... 15.75 -0.10 -0.63%
Apple Inc 111.11 -1.99 -1.76%
Intel Corp 34.60 -1.20 -3.37%
Cisco Systems Inc 27.21 -0.76 -2.72%
Data as of 2:38pm ET

Sections

After a season that included harsh criticism of NFL for not doing enough on domestic violence, Super Bowl will include spot drawing attention to the issue. More

You need a lot less to get into the Top 1% in Arkansas than you do in Connecticut. More

Daniel Kottke's college days in the '70 were pretty prosaic: Pink Floyd, a pastoral campus and hallucinogens. The only thing that was remarkable was his fellow traveler: Steve Jobs. More

On demand delivery startup WunWun is expecting its order volume to double by the time they close up shop on Monday. All thanks to a blizzard. More

CNNMoney/PayScale's top 100 careers with big growth, great pay and satisfying work. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2015 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2015. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2015 and/or its affiliates.