AIG, the world’s biggest insurer, with subsidiaries in 123 countries, is now a subsidiary of the US Government.
The Federal Reserve Bank of New York has given AIG a two-year, revolving $85bn revolving credit facility that will ensure that company meets its liquidity needs.
AIG gave up a 79.9% stake in the company, making the world's biggest insurer effectively a government subsidiary.
AIG says: "The AIG Board has approved this transaction based on its determination that this is the best alternative for all of AIG's constituencies, including policyholders, customers, creditors, counterparties, employees and shareholders. AIG is a solid company with over $1 trillion in assets and substantial equity, but it has been recently experiencing serious liquidity issues. We believe the loan, which is backed by profitable, well-capitalized operating subsidiaries with substantial value, will protect all AIG policyholders, address rating agency concerns and give AIG the time necessary to conduct asset sales on an orderly basis. We expect that the proceeds of these sales will be sufficient to repay the loan in full and enable AIG's businesses to continue as substantial participants in their respective markets. In return for providing this essential support, American taxpayers will receive a substantial majority ownership interest in AIG. We commend the Federal Reserve and the Treasury Department for taking this decisive action to address AIG's liquidity needs and broader financial market concerns. We thank them for their leadership during this critical time for the global financial markets."
Life insurance: News update: September 2008