AIG’s woes persist despite aid

CHARLOTTE, N.C. | Nearly six months after American International Group Inc. got its first massive bailout from the government, it’s still stumbling.

The big insurer keeps losing money and is unable to sell some of its biggest assets. Some Wall Street analysts have stopped tracking it. And it appears on the verge of getting another helping hand from Washington.

Like Citigroup Inc., which on Friday received another round of federal support, AIG is considered too big and too important to fail.

“If the government lets AIG fail, I think you are going to see an enormous sort of shock wave across all industries, because AIG had their finger in a lot of different areas,” said Russell Walker, a risk management professor at Northwestern University in Chicago.

Expectations are that AIG and the government will announce soon, perhaps as early as Monday, their latest plan to prop up the New York-based company.

The Financial Times, citing people who spoke on the condition of anonymity, reported this week that the government will swap the 80 percent stake it currently holds in AIG for even bigger pieces of three units that would be split off from the company: AIG’s Asian operations, its international life insurance business and its U.S. personal lines business. A fourth unit made up of AIG’s other businesses and troubled assets could be created as well or sold off in pieces, according to the FT report.

In return for the breakup, the government would relax the terms, or cancel, a portion of the $60 billion loan that was at the center of a restructured $150 billion rescue package, the newspaper said.

The company may also need another loan, its fourth, from the government, as it is expected to report a $60 billion fourth-quarter loss on Monday.

AIG has been forced to seek more help because of a combination of factors including the recession and its falling stock price, now well under $1. Perhaps its biggest problem is the fact that the asset sales that were supposed to help the company pay back government loans aren’t happening, in part because the credit crisis that initially landed AIG in trouble last summer is also preventing would-be buyers from getting financing.

“If companies actually have cash, or the ability to make a purchase, they are not jumping on AIG right now,” said Donn Vickrey, an analyst with Gradient Analytics Inc. “The prudent thing for (companies) to do is just say ‘no’ at this point unless it’s just an insanely cheap price.”

That advice doesn’t bode well for AIG, which said in October it would sell off business units to repay an original $85 billion loan from the Federal Reserve that it received a month earlier. The loan was reduced to $60 billion in November as part of the larger restructured rescue package totaling $150 billion; it had roughly $38 billion outstanding as of this week.

As of Feb. 13, AIG had already sold interests in nine businesses. But it needs to sell more.