All those who thought that AIG was out of the woods following its massive Federal Reserve bailout, may be in for a surprise.
(Bloomberg) -- American International Group Inc. posted a wider-than-expected loss after setting aside more reserves for insurance claims and paying down bailout debts. The shares fell 8.5 percent in New York trading.
The fourth-quarter net loss of $8.87 billion, or $65.51 a share, narrowed from $61.7 billion, or $458.99, a year earlier when AIG recorded the biggest loss in U.S. corporate history, the New York-based firm said today. Results included $6.7 billion in charges fueled by paying down AIG’s Federal Reserve credit line. It cost AIG $1.8 billion to add to property- casualty reserves as sales in the division slipped 2.2 percent.
“The reserve boost is a little red flag, as the industry is seeing largely favorable trends in reserve development,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago. “It was a messy quarter, and overall it shows you how deep a hole they’ve dug, and how hard it is for them to dig out.”
"How hard they dig" is a question that should be examined closely.
AIG may have been “aggressive” in pricing its workers’ compensation and professional liability policies, Sanford C. Bernstein said in a research note in November estimating that the shortfall may be $11 billion.
Competitors including Chubb Corp. and Liberty Mutual Group Inc. have said that AIG, in an effort to keep customers, is slashing its prices to levels that may be inadequate to cover claims. Joel Ario, the Pennsylvania insurance regulator, said he expects to complete a “broad-scale examination” into AIG during the first half of this year, including whether the insurer is underpricing.
AIG, of course, doesn't have to worry about whether it underprices its claims since it is Too-Big-To-Fail. However, we might be getting set up for another round of taxpayer bailouts.
God, meanwhile, back at the Farm, the Fed, our Gov. bought and paid for Senate (esp.) Congress are just completely ignoring derivatives as if it all just doesn't exist.
What are chances for economic Armageddon redux and I do believe Las Vegas or some place should allow bets on it happening in a certain time window at this point.
Gee wiz, only $8.87 billion in a single quarter and how much money have we given to AIG? I lost count, I thought it was about $150 billion at this point. Have to go check my notes.
Just $70 Billion in the hole now
They've paid back about half of what they owe. However, there is another tiny condition about us getting that back.
So, let me guess....if "the economy turns for the worse" means just how many CDSes? How much toxic gambling debt is still left? Oops, but haircuts, which could have been imposed in bankruptcy....nary a possibility....and while we're focused in on the 100% payouts PLUS the acquisition of the underlying CDO by the various counterparties....
how much of this is left to go and of course, I'm sure there is no further negotiations for a hair cut right?