The UK’s Times reports that AIG is looking to liquify some holdings to shore up its balance sheet and hopefully its stock price. While AIG, like Lehman, is making a “reassure investors” presentation ahead of its scheduled earnings announcement, the article gives the impression that AIG can provide a more concrete, readily executed salvage operation than Lehman did mid last week.
However, AIG is perceived to be sufficiently weakened that bankers meeting with the Fed and Treasury on Saturday mentioned AIG, along with Merrill and WaMu, as the next shoes that might drop. Insurance experts contend that their situations are different (you can’t have a run on an insurer, and lMBIA and Ambac have managed to soldier on in weakened form despite having a business model that is not viable in the long term).
From the Times:
AIG, the world’s largest insurer, is planning a $20 billion (£11 billion) asset sell-off as it fights to correct a record slump in its share price and braces for the impact of Hurricane Ike.
Details of the plans could come as early as tomorrow. On Friday the insurer appointed investment bank JP Morgan to work on a rescue plan after its shares fell a record 31% in a single day.
Assets under the hammer include Transatlantic Holdings, its New York-listed reinsurance group. Swiss Re and Munich Re, two giants of the European reinsurance business, are understood to be potential buyers. Other assets on the block are AIG’s consumer finance, reinsurance and plane-leasing units, according to analysts at Citigroup…
As much as a program of that magnitude might assuage concerns (provided the price estimates for the asset sales seemed reasonable), they may be seen as insufficient. From the New York Times:
A.I.G., one of the world’s largest insurers, may need to raise $30 billion to $40 billion to avoid a severe downgrade to its credit rating, according to people briefed on the situation [at the Lehman meetings on Saturday]. An A.I.G. spokesman, Nicholas J. Ashooh, called that estimate speculative and declined to comment further.