American International Group Inc, the largest US insurer, may move up plans to raise capital or sell assets after share prices plunged 46 percent this week, a person familiar with the company said.
Chief executive officer Robert Willumstad may announce the reorganization before his Sept. 25 deadline, said the person, who declined to be named because the New York-based insurer hasn’t made an official statement.
AIG shares slumped and the cost of insuring its debt rose to a record on Friday on concern that the company could be the next big US financial firm after Lehman Brothers Holdings Inc to run short of capital.
Standard & Poor’s said it may downgrade AIG’s credit ratings because the decline in share prices could crimp the insurer’s access to capital. New York insurance regulator Eric Dinallo is keeping in “closer touch” with the company, spokesman David Neustadt said.
“It’s a carbon-copy story for a lot of these guys that need capital,” said Robert Bolton, managing director for trading at Mendon Capital Advisors Corp in Rochester, New York. “It’s unprecedented that two storied franchises — Bear Stearns and Lehman — have taken on the type of water they have, and now there are fears about another titan, AIG.”
AIG dropped US$5.41, or 31 percent, to US$12.14 on Friday in New York Stock Exchange composite trading.
The price of credit-default swaps, used as hedges against losses on bad debt, approached distressed levels and traded higher than those for Lehman, the securities firm that’s fighting for survival.
The insurer hired JPMorgan Chase & Co. to raise capital, CNBC said, citing two people it didn’t identify.
A capital-raising plan could be disclosed before Monday and involve Blackstone Group LP or BlackRock Inc, the network said.
AIG spokesman Nicholas Ashooh declined to comment on the CNBC report, as did Joseph Evangelisti of JPMorgan, Bobbie Collins of BlackRock and John Ford of Blackstone.
AIG may be able to raise US$20 billion selling assets, including its consumer-finance, reinsurance and plane-leasing units, analysts at Citigroup Inc said.
The insurer raised US$20.3 billion in May by selling debt and equity, diluting the holdings of long-time investors.
It’s “very hard to predict” whether AIG will need more capital, Willumstad said on Aug. 7.
“As distressed as they are, raising new capital could be extremely hard,” said Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California.
A ratings cut may have “a material adverse effect on AIG’s liquidity” and trigger more than US$13 billion in collateral calls from investors who bought protection from AIG through credit-default swaps, the insurer said in an Aug. 6 filing.
The company was forced to put up US$16.5 billion in collateral through July 31.
“Our job is to assess the ability of the insurance company to pay their claims, and that’s not in question at this point,” said Neustadt, spokesman for Dinallo. “Given what’s going on with the holding company, we’re keeping in closer touch.”
S&P’s Rodney Clark said “AIG has sufficient capital and liquidity to meet its policy obligations and potential collateral requirements, which are significantly greater than the expected cash losses on the mortgage-related assets.”
Still, Clark said in a note, “additional market value losses will place some strain on the company’s resources.”
The firm reported about US$25 billion in writedowns in three previous quarters on the swaps. The contracts backed US$441 billion of assets as of June 30, including US$57.8 billion in securities tied to subprime mortgages.
Most of the valuation declines on the swaps will reverse and AIG may have to pay US$8.5 billion on the contracts in a worst-case scenario, the company said on Aug. 7.
COMPETITION: AMD, Intel and Qualcomm are unveiling new laptop and desktop parts in Las Vegas, arguing their technologies provide the best performance for AI workloads Advanced Micro Devices Inc (AMD), the second-biggest maker of computer processors, said its chips are to be used by Dell Technologies Inc for the first time in PCs sold to businesses. The chipmaker unveiled new processors it says would make AMD-based PCs the best at running artificial intelligence (AI) software. Dell has decided to use the chips in some of its computers aimed at business customers, AMD executives said at CES in Las Vegas on Monday. Dell’s embrace of AMD for corporate PCs — it already uses the chipmaker for consumer devices — is another blow for Intel Corp as the company
STIMULUS PLANS: An official said that China would increase funding from special treasury bonds and expand another program focused on key strategic sectors China is to sharply increase funding from ultra-long treasury bonds this year to spur business investment and consumer-boosting initiatives, a state planner official told a news conference yesterday, as Beijing cranks up fiscal stimulus to revitalize its faltering economy. Special treasury bonds would be used to fund large-scale equipment upgrades and consumer goods trade-ins, said Yuan Da (袁達), deputy secretary-general of the Chinese National Development and Reform Commission. “The size of ultra-long special government bond funds will be sharply increased this year to intensify and expand the implementation of the two new initiatives,” Yuan said. Under the program launched last year, consumers can
TECH PULL: Electronics heavyweights also attracted strong buying ahead of the CES, analysts said. Meanwhile, Asian markets were mixed amid Trump’s incoming presidency Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) shares yesterday closed at a new high in the wake of a rally among tech stocks on Wall Street on Friday, moving the TAIEX sharply higher by more than 600 points. TSMC, the most heavily weighted stock in the TAIEX, rose 4.65 percent to close at a new high of NT$1,125, boosting its market value to NT$29.17 trillion (US$888 billion) and contributing about 400 points to the TAIEX’s rise. The TAIEX ended up 639.41 points, or 2.79 percent, at 23,547.71. Turnover totaled NT$406.478 billion, Taiwan Stock Exchange data showed. The surge in TSMC follows a positive performance
FUTURE TECH: Nvidia CEO Jensen Huang would give the keynote speech at this year’s Consumer Electronics Show, which is also expected to highlight autonomous vehicles Gadgets, robots and vehicles imbued with artificial intelligence (AI) would once again vie for attention at the Consumer Electronics Show (CES) this week, as vendors behind the scenes would seek ways to deal with tariffs threatened by US president-elect Donald Trump. The annual Consumer Electronics Show opens formally in Las Vegas tomorrow, but preceding days are packed with product announcements. AI would be a major theme of the show, along with autonomous vehicles ranging from tractors and boats to lawn mowers and golf club trollies. “Everybody is going to be talking about AI,” Creative Strategies Inc analyst Carolina Milanesi said. “From fridges to ovens
RSS