by John Darer CLU ChFC MSSC CeFT RSP CLTC
AIG was downgraded by all ratings agencies September 15, 2008.
A Am Best
A Fitch
A- S&P
Aa3 Moodys
The ratings reflect the current environment at AIG. They are not reflective of all structured settlement companies.
Following the rating action there was a lot of speculation as to what will happen today or tomorrow or next week with AIG. Rest assured I am on top of it and will let you know what I know so that you can address the situation or the questions of any of your clients.
1. The AIG core insurance business (life, health, annuities) is not what has caused the impairment. AIG is a leader in many lines of insurance worldwide. The company operates globally on multiple silo business model. The toxic assets are confined to a single business unit.
2. Insurers must set claims reserves and actuary certification of asset liability matching is required by New York and most other states.
3. At the time of this writing there has been no announcement of bankruptcy, but please note that Insurance regulators work to protect the interest of structured settlement annuitants.
There is precedent. In re: Monarch Life bankruptcy creditors were not able to get at the structured settlement assets, even in the absence of secured creditor protections common in today's structured settlements.
At the time of posting Executive Life of New York (ELNY) annuitants were still getting paid and that impairment happened in 1991. ELNY
I understand that regulators such as NY were at AIG over the weekend, but at this point there has been no move to take over the company.
CNBC reiterated that the insurance subsidiaries would be OK in the event of bankruptcy. On a separate note Maurice R.Greenberg, the former AIG chairman, said this morning, in conversation with Maria Bartiromo that this is a short term liquidity problem that can be solved over time not an insolvency problem. Minutes ago CNBC reported that Fed bailout of AIG is back on the table. Things are fluid so stay tuned.
AIG reps who were at a meeting I attended yesterday indicated that a fact sheet will be released sometime today. We will get information to you as soon as possible.
Readers free to contact me anytime to discuss your thoughts and/or concerns.
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