AIG (NYSE:AIG) May Want Even More Taxpayer Money after Fourth Quarter Results


Sunday, February 28th, 2010

The recent quarterly report for AIG (NYSE:AIG) had them losing $8.87 billion, while they stated their core insurance business is still very weak, while costs increased due to paying back loans from the government. Total costs for repaying loans was $6.2 billion.

It's hard to tell how serious AIG is about getting more money from taxpayers, as they've made those statements in past filings with the SEC.

Having said that, it would be better to allow them to collapse than for the company to continue on like it is. This of should have been what happened in the banking industry in the U.S. as well, but that obviously wasn't allowed to happen.

The major problems shareholders see is that the weakness of the insurance business of AIG isn't allowing it to generate enough income to pay off what it owes taxpayers, keeping them at almost subsistence levels for revenue and profits.

AIG has received an outrageous amount of government aid, valued at approximately $182.5 billion, and the government is the majority owner in the business at this time as a consequence.

When you're talking that type of money, AIG, or any other business for that matter, can no longer be considered legitimate, and so the bailout has again allowed a horribly run company to be propped up for political expediency.

The reason for the near demise of the company was the derivatives contracts the company invested in, whose decrease in value instigated the government bailout.

The insurance business of the company had been solid during that time, although it did drop in the fourth quarter as far as the writing of new premiums.

There is no way this company should be ever allowed to be bailed out again. Even though they owe the type of money they do to the government, it's not the government that is really in control, as their too big to fail policy and resultant moral hazard puts AIG and others like them in the position to make demands for bailouts, or the politicians will have to answer why they did it in the first place. They aren't eager to address such issues.



Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: aig , derivatives , government bailouts , insurance company

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Comments:

Matthew (February 28, 2010 5:18 PM)
I think whole idea of regulating credit default swaps is very important. AIG obviously made some bad bets and unfortunately for taxpayer we were on the hook.
William Shakesphere (February 28, 2010 5:02 PM)
You are an idiot.
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