AIG Plans Major Restructuring, According To Report

By: AP
By: AP

CHARLOTTE, N.C. - The Wall Street Journal reported Sunday that American International Group Inc. plans to disclose a restructuring by early Monday that's likely to include the disposal of major assets including its aircraft-leasing business and other holdings.

AIG's chief executive, Robert Willumstad, who took the reins on the world's largest insurer in June, has indicated he was willing to shed some assets, saying about a month ago that a "less complex AIG would be a better competitor."

The need to restructure was likely exacerbated by a 45 percent drop in AIG's stock last week. The stock fell more than 30 percent on Friday alone, as Standard & Poor's warned that it could cut AIG's credit rating by one to three notches because of concerns that AIG will have difficulty accessing capital in the short term.

The Journal said on its Web site Sunday that AIG was talking to several private equity firms about getting more capital and was hoping to raise more than $10 billion.

AIG spokesman Nicholas Ashoohm declined to comment.

The New York-based insurer has already raised $20 billion in fresh capital this year.

Like other insurers, AIG has been hit hard by deterioration in the credit markets amid concerns that complex, structured investments it insures will increasingly default. For the three quarters ended in June, AIG lost about $25 billion in the value of credit default swaps — or default protection for bondholders — and about $15 billion on other investments.

The insurer is considering selling or spinning off its profitable aircraft-leasing arm, International Lease Finance Corp., which posted record results in the second quarter. AIG was also considering selling other parts of its business, including assets related to property and casualty insurance, the Journal noted.

When Willumstad became chief executive of AIG in June, he said would conduct a review of the company over the next two to three months, saying "nothing is off the table, and there will be no sacred cows." Calls for a breakup of the company grew louder from Wall Street analysts after AIG posted a loss of about $5.4 billion for the second quarter. Following those results, Willumstad said his review could result in "significant changes," though he didn't provide details.

As recently as June, AIG considered shedding ILFC, a company founded in 1973 that has a fleet of more than 900 airplanes valued at more than $50 billion. But newly appointed Willumstad said after reviewing ILFC's business, "ILFC should be a part of the AIG portfolio." ILFC primarily leases aircraft from Boeing and Airbus to major airlines and had net income of more than $200 million in the second quarter.


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