The deal with Zurich, recently finalized, was brokered after several months of discussion and, within the last few weeks, serious negotiations. AIG plans to use the proceeds of the sale to repay a portion of the $178 billion owed to the U.S. government.

This acquisition was funded by a $1.1 billion institutional share offering will be a big boon from Zurich; the company hopes that this will boost their presence in the United States. Back in 1998, the company purchased Farmers Insurance. Zurich is the fourth-largest insurer in Europe, and with the sale, it will be poised to take place as the third-largest personal lines insurer in the largest global insurance market.

AIG’s high-margin private client division, a part of the insurer’s personal lines unit, was not included in the current deal with Zurich. While there may be speculation that Zurich would be interested in these holdings, according to the company’s CEO, Jim Schiro, was quick to suggest that Zurich was very pleased with the AIG purchase since it would increase earnings. Schiro was quoted as saying: “This will give us the expansion capability that Zurich has been seeking since buying Farmers, and gives us a direct marketing platform, which is key.”

The acquired division, which currently trades under the 21st Century name on the market will be known as Zurich.

Despite this news, AIG has continued to pursue its agreement with the Federal Reserve to sell of a total of 11 businesses in exchange for $85 billion in bailout funds. Yet, it is clear that AIG’s financial woes are far from over-in fact, they may be worsening.

AIG Sells US Auto Insurance Division European Insurer Zurich is a post from: Peppercoin Insurance

The insurance company reportedly halted payments to the Alabama-based shopping center developer Alex Baker. Fifteen banks may face possible exposure to defaults on loans. Despite assurances from AIG that a settlement is available, the lenders and financial institutions involved are not likely to accept the offer.

In February, the insurer’s inability to keep its payment obligations landed AIG in the middle of a lawsuit filed by Mitchell L Morgan Management Inc. According to an AIG spokesperson, the company and Morgan have made an agreement to postpone any litigation for 60 days to broker a settlement-even while the insurer’s position is that Morgan’s complaint is groundless.

The figures for AIG’s real estate branch, AIG Global Real Estate, place its interests at an astounding $23 billion. This number represents about 53 million square feet of real estate. This may explain better what sort of blow the insurer’s activities might be to the markets as well as the banks and developers.

In the aftermath of such mismanagement and failure to meet obligations, the company has been placed under the watchful eye of the Federal Reserve. Every transaction conducted at AIG is being monitored closely. With $180 billion in bailout funds provided to keep the insurer solvent, it stands to reason why there is so much oversight.

The final outcome of AIG’s real estate fiasco remains to be decided. Likely, the U.S. government will be playing an active role in its amicable resolution.

AIG Holds Off Giving Funds To Real Estate Ventures is a post from: Peppercoin Insurance

The company has hired Paula Rosput Reynolds, the former Chairman, President, and CEO of Safeco Corp., to the position of Vice Chairman and Chief Reconstructing Officer. Not only will Reynolds be responsible for divestiture of assets but will also be AIG’s primary liaison with the Federal Reserve. Reynolds reports directly to Edward M. Liddy, AIG Chairman and CEO.

The other officer, AIG’s former Senior Vice President and Chief Administrative Officer, Richard H. Booth, will assume the role of Vice Chairman of Transition Planning, while retaining his position Chief Administration Officer. Booth’s duties will include measures to get AIG running according to new operational guidelines, oversight of those businesses being separated and sold by AIG, as well as restructuring of the corporate center. He will also maintain many of his former duties. Like Reynolds, Booth reports to Edward Liddy.

Regarding Reynolds, Liddy said, “Paula brings to AIG deep experience, not only as an insurance industry leader, but also as someone who has successfully realigned organizations to meet new challenges.”

Additionally, Libby commented on Richard Booth’s professional experience and short time of service with AIG. “In his brief tenure as AIG’s Chief Administrative Officer, Dick has made tremendous progress in improving efficiency and reducing costs.”

Speaking of Reynolds and Booth, Edward Liddy had this to say, “Both of these executives will serve us well as we restore AIG as a competitive enterprise that contributes to the economy and returns value to taxpayers and shareholders.”

As the full extent of the ongoing US financial crisis continues to resonate through big businesses and the banking industry, having the right people on board to steer a safe course through the store may save AIG from destruction.

AIG Gets New Restructuring Officers is a post from: Peppercoin Insurance

The declining prices of mortgage assets as a result of the U.S. subprime lending crisis has been responsible for two of the most dismal quarters in the history of the American International Group. During the last quarter of 2007, AIG lost $5.3, a record amount. Then, during the first quarter of 2008, AIG beat that unfortunate record, with a staggering loss of  $7.8 billion.

Earlier today at the New York Stock Exchange, AIG’s shares declined by over 8%. The worth of a share of AIG today was a mere $40.57. Over the course of 2008, AIG’s stock has declined by approximately 44%. This rate of decline is alarming even in light of the tough times that all of Wall Street is currently undergoing: the S&P insurance index has listed the average rate of decline for insurance companies over the course of the past year to be only about 25%.

The Chief Executive of AIG, Martin Sullivan, told investors that the company’s mounting credit problems have resulted in AIG’s credit rating going down, to the point where two ratings firms have downgraded the company. These setbacks, said Sullivan, will raise the cost of maintaining many of the operations AIG is involved in, such as its aircraft leasing unit.

Tom Cholnoky, a Wall Street observer and an analyst with Goldman Sachs, predicts of AIG that “the market is not going to look favorably on this quarter’s results.” Sullivan, observers predict, will have to try to stop the losses and increase the company’s capital. Additionally, he will have to work to rebuild the faith of AIG shareholders after the setbacks they’ve witnessed over the last year.

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This lost comes on the heels of the unfortunate year of 2007, when the company’s stock went down from $70 per share to less than $60 per share. Presently, a share of AIG sells for only slightly above $40 on the New York Stock Exchange. To be exact, its stock went down recently by an entire 2.1% to $44.15 a share, and then decreased by an extra 7.6% during after-hours trading to its present worth of $40.80 a share.

The company is trying to compensate for the losses by generating new capital. Recently, AIG made known its intentions to come up with an additional $12.5 billion through the sale of additional shares and securities, including equity-linked securities and fixed-income securities.

However, AIG also recently increased its per-share dividend to 10%, or 22 cents per share. This move has drawn criticism and confusion from Wall Street observers. William Smith, the CEO of NYC-based Smith Asset Management was uncomprehending. “Why would you dilute your share holders and raise your dividend?,” he asked. “How do you justify that?”

The move that drew so much criticism has resulted in a loss of profits. Profit from shares went down by $3.56 million since last year, the equivalent of $1.41 a share. This is more of a loss than all of Wall Street expected for the year, which was only 76 cents per share.

AIG CEO Martin Sullivan explains what happened. “While we anticipated a difficult trading environment, the severity of the unrealized valuation losses and decline of value of our investments were beyond our expectations,” he stated to the press.

Insurance Giant In Financial Crisis is a post from: Peppercoin Insurance