American International Group's (AIG) chief restructuring officer, Paula Reynolds, said in an off-the-cuff remark during this week's earnings conference call that she told CEO Ed Liddy that it "might be better to go to jail" than to deal with securities laws relating to reorganizing the insurer.
An analysis of the 10-K document filed with the Securities and Exchange Commission explains why she might feel that way. AIG, the largest U.S. insurer, released 725 pages of information on Monday. In the summary, there wasn't one figure that showed how much AIG paid for its investments such as fixed income, equities, mortgages.
AIG has reinvented the definition of "cost" and, consequently, made it impossible to understand where the investment losses lie. AIG's group insurance companies posted $23.6 billion in investment losses in the first nine months of last year, so this is an important detail.
AIG lists investment types by category on its balance sheet. There are three columns of figures: cost, fair value and amount, enabling investors to see the purchase price of an investment, what AIG thinks it's currently worth and the total amount. Nothing special there, except there is a note at the bottom of the page that reads: "Original cost of equity securities and fixed maturities are reduced by other than temporarily impairment charges, and, as to fixed maturities, reduced by repayments and adjusted for amortization of premiums or accrual of discounts."In other words, AIG isn't reporting the original cost of its investments. The insurer is instead listing the cost, minus losses already taken.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV