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AIG Will Have to Sell Big Insurance Units

Stocks in this article: AIG C

American International Group (AIG), the insurer that received $173 billion in taxpayer money to avoid bankruptcy, will probably be forced to sell its main insurance units as interest payments balloon to half a billion dollars a month and investment losses skyrocket.

AIG, the largest U.S insurance company, owes the Federal Reserve annual interest and fee payments of about $6.4 billion. Fourth-quarter results, which are scheduled to be published next week, will include fees of more than $2 billion payable to the government, according to AIG. The insurer, which had delayed the release of its results, will post a loss of $0.45 a share, analysts estimate. Ratings forecasts the loss will exceed $10 per share.

The insurance company, which originally intended to divest only non-core businesses, is facing a combination of high interest payments, limited success in selling group companies and investment losses. In the third quarter, five of the 10 worst investment performances by insurers were AIG companies. Investment losses totaled $23.6 billion.

AIG is in discussions with the government to secure additional funds. The company, which has hired a bankruptcy lawyer, according to CNBC, will assemble for a board meeting Sunday. AIG said it's evaluating "potential new alternatives" for addressing its financial challenges.

AIG's single disclosed sale amounted to $60.5 million for some oil and gas rights earlier this month. That's less than four days interest and fees on the government funding. Below is a chart of the company's divestment program.

AIG Divestment Announcements
Closing or Expected
AIG Financial Products Corp.
Sale of assets - oil & gas rights
$60.5 million
AIG Retail Bank AIG Card
Bank of Ayudhya PCL
$58.7 million subject to adjustment
AIG Life of Canada
BMO Financial Group
$308 million
HSB Group
Munich re
$742 million
Tenaska Marketing Ventures,Tenaska Gas Storage, Tenaska Marketing Canada
Sale of 50% holding
Tenaska, Inc.
AIG Private Bank
Aabar Investments
Unibanco AIG Seguros AIG Brazil Companhia de Seguros
Sale and repurchase of crossholdings
Unibanco AIG Seguros, AIG Brazil Companhia de Seguros

Calls made to AIG by Ratings weren't returned.

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