![]() ![]() Ultimate lossesĪIG could end up paying out as much as $10 billion from the CDS it has sold on CDOs, which is about 10% of the insurer's net worth and roughly three quarters of earnings, Matt Nellans, an equity analyst at Morningstar, wrote in a note to clients on Monday. 30, the insurer estimated.Įxcluding the estimated $732 million from the structural benefits, the portfolio would have dropped by $6 billion during the same period, AIG said in its Monday filing. Without that, the market value of AIG's super senior CDS portfolio would have dropped by $5.2 billion in 2007 through Nov. That's because, in current "difficult" market conditions, the insurer said it wasn't able to reliably quantify this negative basis adjustment. That so-called negative basis adjustment was worth an estimated $3.6 billion.īut AIG said on Monday that it won't include that adjustment when it estimates the fair value of its super senior CDS portfolio at the end of December. It also included an adjustment related to the difference between the value of CDOs implied by trading in the cash market and valuations implied by trading in the derivatives market. That bolstered the estimated market value of its super senior CDS portfolio by $732 million. That estimate included some benefits from the structure of these derivatives that can trigger increased cash flow to the higher quality parts of the CDOs AIG guaranteed, the insurer explained in its Monday filing. Late last year, AIG said that the fair value of its portfolio of super-senior CDS on CDOs had dropped by $1.6 billion in 2007 through Nov. The complexity of these securities and a slump in trading activity has made them tricky to value, adding to concerns. It sold "super senior" CDS that guaranteed higher quality parts of CDOs.īut as the credit crunch widened, the market value of even the best parts of some CDOs have declined. Have also been hit hard by guarantees they sold on CDOs.ĪIG's Financial Products unit sold similar guarantees on CDOs, using credit-default swaps (CDS), which are a type of derivative-based insurance that pays out in the event of a default. Have written down the value of CDO exposures by billions of dollars in recent months, forcing them to raise new capital from government-run funds in the Middle East and Asia. "The announcement highlights the greater risk associated with AIG, and also has increased investors skepticism," Alain Karaoglan, an analyst at Banc of America Securities, wrote in a note to investors.ĪIG shares, a component of the Dow Jones Industrial Averageįell 12% to close at $44.74, nearly a five-year low.ĪIG is the latest financial-services giant to become swept up in CDO problems. residential mortgage-backed securities, Fitch said. More than $62 billion of that was related to CDOs, mainly backed by subprime U.S. The unit's credit derivatives portfolio had a net notional exposure of $505 billion at the end of September. On December 31, 2017, AIG had $65.2 billion in shareholder equity.AIG Financial Products has a large exposure to these securities. ![]() According to the 2016 Forbes Global 2000 list, AIG is the 87th largest public company in the world. AIG was ranked 60th on the 2018 Fortune 500 list. ![]() AIG serves 87% of the Fortune Global 500 and 83% of the Forbes 2000. Life & Retirement includes Group Retirement, Individual Retirement, Life, and Institutional Markets.ĪIG is a sponsor of the AIG Women's Open golf tournament.ĪIG's corporate headquarters are in New York City and the company also has offices around the world. General Insurance includes Commercial, Personal Insurance, U.S. The company operates through three core businesses: General Insurance, Life & Retirement, and a standalone technology-enabled subsidiary. As of January 1, 2019, AIG companies employed 49,600 people. is an American multinational finance and insurance corporation with operations in more than 80 countries and jurisdictions.
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