New administration spells uncertainty for AIG

Doubts about the future of American International Group’s (AIG) European insurance operations were expressed by risk managers at an industry gathering in Milan.

Attendees at the Italian risk management association’s (ANRA) annual conference raised questions over what assets AIG would have to sell to pay back the government loan, which rescued it from bankruptcy in September.

AIG was effectively nationalised by the Bush administration when the Federal Reserve took an 80% equity stake in the company.

Claims by the company that it will hold onto the foreign and domestic property business have not quelled market fears that these units could be sold off to pay back the government loan.

Maurizio Micale, director of risk management and insurance, for Swiss based STMicroelectronics N.V., said: ‘Whether or not AIG remains a property and casualty carrier depends on how quickly they can raise money through the disinvestment of non-core businesses.’

The risk managers also questioned what the future of AIG would be under the new Democratic administration of Barack Obama, who becomes America’s first black president in January 2009.

‘Eighty percent of AIG is in the hands of the US government. It could become an arm for the new administration to reallocate wealth in the country,’ suggested Micale.

‘It could be used to set up a new medical care plan or a new life insurance plan,’ he added.

Alessandro De Felice, group risk manager, Prysmian, said: ‘Under the Obama administration AIG could focus more on US domestic business rather than international business.’

The risk managers also suggested that AIG’s total losses have yet to be revealed.

In a regulatory filing on November 10 the company reported third quarter losses of $24.5bn.

At the same time the US government announced a restructuring of its bailout package, which included a lengthening of the repayment period, a lower interest rate and a further $40bn injection.