Aig - the Fallen Giant - Presentation Transcript

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  • Topic: Credit default swap, American International Group, Credit risk
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  • Published : May 30, 2011
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AIG - The Fallen Giant - Presentation Transcript
1.F A L L E N G I A N T Case Study of American International Group, Inc. J E N N I F E R D E M A R S 2.TABLE OF CONTENTS (hyperlinks) I BACKGROUND II CAUSES OF FAILURE III RISKS TAKEN IV LESSONS LEARNED CONCLUSION REFERENCES 3.AIG Building, 70 Pine St., Lower Manhattan (1931 Photo) B A C K G R O U N D OVERVIEW HISTORY FINANCIAL CONDITION & ANALYSIS 4.O V E R V I E W American International Group, Inc. (AIG) is a world leader in insurance and financial services. It is headquartered in New York City, and operates in more than 130 countries and jurisdictions. Its primary activities include General Insurance and Life Insurance & Retirement Services. NYC 5.In 2006, AIG had sales of $113 billion and 116,000 employees (Saporito, 2009). According to the 2008 Forbes Global 2000 list, AIG was once the 18th-largest public company in the world. It was listed on the Dow Jones Industrial Average from April 8, 2004 to September 22, 2008. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo. O V E R V I E W London, England 6.AIG Building, 70 Pine St., Low er Man hattan AIG faltered in America’s sub-prime mortgage crisis. It had traded heavily in credit default swaps and could not meet its obligations. The United States government came to its rescue with an $85 billion bailout on September 16, 2008. O V E R V I E W 7.AIG has taken a major step toward cleaning up its image by reorganizing its insurance units under AIU Holdings, as of March 2009. AIU and its subsidiary brands are now distinct from AIG (National News, 2009). The holding company, itself, is currently undergoing rebranding that includes a new name, which is expected to be revealed in the near future. O V E R V I E W 8.H I S T O R Y Cornelius V. Starr started AIG as “American Asiatic Underwriters” in 1919 in Shanghai (Madsen 2008). 9.H I S T O R Y Starr moved AIG from Shanghai to New York after the Communists came to power in 1949. 10.In 1962, Starr gave management of the company's lagging U.S. holdings to Maurice R. Greenberg , who shifted its focus onto selling insurance through independent brokers rather than agents. In 1968, Starr named Greenberg his successor. AIG went public in 1969. Maurice R. Greenberg H I S T O R Y 11.H I S T O R Y Greenberg was fired due to accounting scandal in February 2005, and was succeeded as CEO by Martin J. Sullivan . On June 15, 2008, Sullivan resigned and was replaced by Robert B. Willumstad , Chairman of the AIG Board of Directors. Willumstad was forced by the U.S. government to step down and was replaced by Edward M. Liddy on September 17, 2008. 12.H I S T O R Y SEPTEMBER 2008 AIG’s credit ratings were downgraded below "AA" levels, causing the company to suffer a liquidity crisis. The United States Federal Reserve Bank created an $85 billion credit facility to help AIG meet increased collateral obligations, in exchange for stock warrants worth 79.9% of the company’s equity. H I S T O R Y 13.H I S T O R Y LATE SEPTEMBER 2008 Two weeks after AIG was bailed out, the company held a $443,344.71 party for its salespeople at the St. Regis Resort in Dana Point, California. 14.H I S T O R Y ST. REGIS RESORT

15.H I S T O R Y Since September 2008, AIG has been marketing its assets to pay off its government loans. A decline in the valuation of insurance businesses, and the weakening financial state of potential bidders, has hindered its efforts (Barr 2009). AIG subsidiary, International Lease Finance Corp. (ILFC), Los Angeles, CA 16.H I S T O R Y MARCH 2, 2009 AIG reported a fourth quarter 2008 loss of $61.7 billion. The announcement of the loss had an impact on morning trading in Europe and Asia, with the FTSE100, DAX and Nikkei all suffering steep losses. In the U.S., the Dow Jones Industrial Average fell to below 7000 points, a twelve-year low. H I S T O R Y 17.H I S T O R Y On top of these losses, in...
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