20080925-Natixis-AIG overview of businesses that could soon be put up for sale

n AIG has signed a definitive agreement regarding the credit facilities granted by the
Federal Reserve. The Fed will grant the group a bridge loan for up to $85bn at a
rate corresponding to the 3-month Libor + 850 bp. In return, the US government
will get its hands on 79.9% of AIG’s capital.
n Given the high interest rate on the loan (almost 12% above current interest rates )
and AIG’s low debt rating, the group will have to sell off some of its activities and
thus be at least partly dismantled. AIG’s asset disposal plan is expected to be
announced soon given the urgency of the situation. We can assume that the
priority will be to divest non-insurance activities such as ILFC (aircraft leasing) and
asset management, but the group will also inevitably have to get rid of insurance
activities as well, although here the list is uncertain. CEO Ed Liddy has just
announced that AIG will emerge from the current crisis as a smaller but profitable
company. These statements suggest that the group will do what it can to hold on to
its core businesses (in particular P&C insurance in the USA).
n AIG boasts strong positions in insurance in the USA (in P&C it is the no.1 in
corporate risks; in life insurance it has a strong presence in fixed annuity and
universal life products) but also overseas, where assets could be sold off. It is the
leading non-domestic life insurer in Asia and, above all, the no.5 life insurer in
Japan, with major positions in many countries (Taiwan, Hong Kong, South Korea,
Singapore, etc.). AIG also owns 59% of the world’s no.8 reinsurer Transatlantic,
which is listed in New York.
n The group’s current situation should enable its rivals to grab some of its market
share (wariness among some of its partners and clients).