AIG Says D&O Coverage Secure

AIG sent a statement laying out the details of its deal with the Federal Reserve, the replacement of CEO Robert Willumstad, and the status of its subsidiaries. The letter included details of the transaction between the Federal Reserve Bank of New York to provide a 24-month liquidity facility to AIG in the amount of $85 billion.

• The transaction will allow AIG to address its immediate liquidity needs, which will benefit policyholders, brokers, employees, and shareholders.

• The Federal government will receive 79.9 percent equity interest in AIG.

• Edward Liddy, former Allstate CEO, has been named new CEO of AIG.

New York and Pennsylvania insurance departments were prepared to allow AIG to exchange liquid investment holdings of the insurance companies for high-valued, less liquid holdings of the parent company. While the transaction was not necessary, the insurance departments’ willingness to pursue such options indicates that they are confidant in the financial strength of AIGCI’s subsidiaries.

Additional facts included in the briefing:

• AIGCI’s subsidiaries, including Lexington, National Union and American Home, continue to be well capitalized with statutory surplus of $26.7 billion and invested assets exceeding $70 billion.

• AIGCI has ample resources to pay policyholder claims, paying $73 million in claims every single day.

• AIGCI’s statutory surplus has grown over 50% since 2005 to $26.7 billion, exceeding the total shareholders’ equity of all domestic commercial insurance holding companies.

• AIGCI’s Net Written Premium to Surplus Ratio, a key indicator of the amount of leverage of a property casualty organization is <1.0 with total NWP of $12.7 billion compared to policyholder surplus of $26.7 billion at the period ending June 30, 2008.

• AIGCI’s financial strength ratings are excellent and higher than many commercial insurance companies.

Click here for the entire letter.