AIG says policyholders safe despite problems
September 17, 2008
Insurance company American International Group, parent of AIU, which insures thousands of Americans overseas, tried Tuesday to reassure policyholders that their policies were safe, even though some analysts say the company could fail within days.
AIG subsidiaries, including AIU, "are well capitalized and meet or exceed local regulatory capital requirements," an AIG spokesman said Tuesday, reading a prepared statement. "These companies continue to operate in the normal course to meet our obligations to all our policyholders."
AIG, the biggest insurance company in the U.S., covered other firms against mortgage losses, and has had to pay out more than $18 billion to cover bad mortgage debts in the wake of the U.S. housing crisis, according to the Web site Smart Money.
On Monday, three major credit rating agencies lowered AIG’s debt rating, likely making it more expensive for the company to borrow money. The reduction also means AIG will have to put up at least $14 billion more in collateral to cover its debt obligations, according to the Web site Barron’s.
The company’s stock price fell 63 percent in early trading Tuesday before rebounding slightly. Shares were trading for just about $3 at about 5 p.m. Central European Time. The company’s stock had been as high as $70.13 in the past year, according to market data.
Some analysts have suggested AIG might try to sell off parts of the company. If it fails before selling off its insurance division, it’s possible that policyholders would lose their coverage, though probably not immediately.
"An insurance company wouldn’t go out of business tomorrow," Scott Simmonds, an independent insurance consultant based in Saco, Maine, told Smart Money. "Regulators wouldn’t allow that to happen. There would be a gray period."