In an unexpected development, the Federal Reserve is indicating AIG's ( AIG) borrowing against credit lines was down $6.8 billion to $83.5 billion as of Wednesday night.

The reduction may not mean anything, if this is only in the securities lending program, and we still might find out that the core $85 billion loan facility has had additional drawdowns. However, at this stage, it could be a positive move reflective of the capital markets loosening up.

Last week, AIG had only about eight weeks of cash left if the company continued to draw on the Fed loan. Even if AIG has stopped the bleeding, it must take immediate steps to sell some of its assets, including the aircraft-leasing business, and start to repay the Fed loans.

The appointment last week of Paula Rosput Reynolds as chief restructuring officer at least suggests that AIG is taking steps to dispose of assets, but the time to act is now, not when cash has been depleted to nothing.

Prudential PLC ( PUK), whose CEO, Mark Tucker, indicated an interest in certain assets of AIG, has kept quiet recently about the possibility of a purchase. Now, MetLife ( MET) is thought to have emerged as a possible suitor. Ratings issues financial strength ratings for 4,000 life, health, annuity, and property/casualty insurers are available at no charge on the Insurers & HMOs Screener. In addition, the Financial Strength Ratings on each of the nation's 8,600 banks and savings and loans are available on the Banks & Thrifts Screener.
Gavin Magor joined Ratings in 2008, and is the senior analyst responsible for assigning financial strength ratings to health insurers and supporting other health care-related consumer products, including Medicare supplement insurance, long-term care insurance and elder care information. He conducts industry analysis in these areas. He has more than 20 years' international experience in credit risk management, commercial lending and analysis, working in the U.K., Sweden, Mexico, Brazil and the U.S. He holds a master's degree in business administration from The Open University in the U.K.

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