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The logic behind this is ludicrous. The reason why the stock is trading where it is now is because of strong investment by the US government. If the US government pulled its support from AIG, the company would tank pretty quickly.
I still do not see a company with a 102.1 combined ratio as being profitable. Accounts from different versions of Chartis are being reunderwritten due to their unprofitability.
The government should have let AIG fold and go under. The business would have gone to other carriers at different pricing and terms. The market would have hardened faster than Michael Phelps swimmming the 100 meter freestyle.
What makes you think the business would have gone anywhere? Even if the gov’t didn’t step in and AIG had to hold a fire sale the insuring companies would have been snapped up in a heartbeat and probably run as-is, which means you would still be getting your butt handed to you on a daily basis and your continued whining and moaning about it continued to be read here.
Business would have gone to other markets at new prices and conditions.
The companies that AIG insured would not have gone away. It is just their insurance carrier.
You have no idea of what you are talking about Phoenix.
You obviuosly have no idea what you’re talking about. Are you so simple minded as to believe the governmnet saved AIG? Are you so delusional to think the government could turn anything into a profit? Do you know anything about derivatives, Fannie Mae, Freddie Mac. You sound stupid – or are you just a blind liberal?
Learn to spell correctly reader. My 2nd grade daughter spells better than you.
As far as underwriting profit, Chartis had a combined ratio of 102.1. That means the company paid out roughly $1.02 in claims for every dollar of premium it collected.
As far as derivatives, the insurance operations would have been unaffected statutory accounting rules in each state would not have allowed them to take on high risk investments.
The question to be asked is the true value of their loss reserves. The company has large exposures in such areas as worker’s compensation, asbestos, construction defect, etc.
Just a penny for your thought reader…
very weak. ‘nothing wrong w/ my spelling.
obviuosly- oops!!!!!!!!!!!!!
Yes, reader it is NOT Governmnet it IS government.
My 2nd grade daughter can spell better than you!!
Whether AIG is currently profitable or not is beside the point of the article, which is that the US will make a profit on the buyout of AIG. I think the math is questionable as they are making the calculations based on the initial buyout, while the second round of tarp was on even poorer terms. The sale price is right of course, but i think they are seriously underestimating what the initial costs were.
Everyone can draw their own conclusions about whether that is an honest mistake or an intentional misdirection for politics sake. Though i think an honest mistake is worse.
Everytime I see an article about the supposed profits the Treasury will make from an AIG sale, I want to throw up. Fellas, they still owe $80 Billion of our tax dollars. If we ever see the so called loan/bailout paid completely back, it may not be in our lifetime. My guess is that at some point they will just forgive the balance and call it a day.
Are you kidding me? Anyone foolish enough to belive this is good news needs to be sterilized. Wait, perhaps I’m being too cynical- when do I get my check for my share?
This is all PR crap (taxpayers making money). This makes me sick – it is so dis-honest!
I believe this like I believe Facebook is worth $100,000,000,000!
Why is the article missing the fact that AIG was spared paying taxes last year? If you don’t pay your billions into the IRS, then of course you are going to turn a profit. I don’t think AIG is as strong as the government wants you to believe. But they sure have Wally Street :-) fooled. Sadly our 401K’s are going to own a whole bunch of this crappy stock and again as US citizens, we are going to get screwed again by AIG. 1st time – bailout, 2nd time – not paying taxes, 3rd time – through our 401K. When will it end???
Insurance lesson. Combined ratio of 102 means they took in one dollar and paid out $1.02 in claims before investment income. So if they made 7% on their money they had a profit of 5%. Insurance companies regularly run combined ratios in the 100 to 110 range and still make a profit. You might be confused with an underwriting loss.
What would have happened if they let AIG go down? The US finacial system may have taken an even bigger hit. Not sure I would have wanted to experience that.
You are right, if the US dumped all of the stock right now AIG would take a hit. The government would lose money when if the stock went down. They are smart selling off some as the stock continues to improve. No different than if Bill Gates dumped all his Microsoft stock. That is investing 101.
So agent, a knee jerk quick hard market would be good for the US economy? No way you can be an agent since those comments are just plain stupid. Get real
Wow, there is some strong disdain people have here for AIG/Chartis. We weren’t the only cause of the financial crisis. As an employee, i am very knowledgeable about the bailout of all the US firms to receive TARP funds, particularly AIG’s story. Did any other firm return a profit on the use of TARP funds? People mostly don’t understand the ‘too big to fail’ concept and how it applies to AIG. If AIG failed, as many suggest it should have, the carrier marketplace could not have absorbed all the components without a larger cost to businesses and government entities (during a financial crisis, might i add). AIG doesn’t just insure 98% of the fortune 500 companies or 94% of the global 1000, we solely insure entire cities, municipalities, transit systems, etc. across the US and world that the marketplace had no solution for when the insurance was placed with AIG. It would have taken a gigantic marketplace effort to adequately cover even some of these risks/positions and the cost to gov’t and business would have been much higher than the cost AIG underwrites them for (if it could be done at all). This was covered well in some Wall St. Journal and Financial Times articles in late 2008/early 2009. It is not as simple as most people seem to think it is. The Fed/Treasury/GAO have some extremely bright individuals (unlike congress). Trust me, they reviewed this closely before deciding AIG needed the bailout. AIG/Chartis is still the largest US P&C insurer and they are posting profits quarter after quarter (yes, comm’l insurers are still making an UW profit at a combined over 100% due to long-tail claims). We at AIG/Chartis are thankful for the assistance provided by the Gov’t and taxpayers and have worked exceptionally hard the last 3 years to repay back every dime and return a profit for the assistance (yes, there is real profit to the taxpayers…don’t assume you are brighter than the GAO and it is all a political game…media journalists can easily validate or invalidate the public data posted for an objective process). Our competitors fought tooth and nail to knock us down and out, but we not only survived, we are starting to thrive again. I am not trying to come across as pompous here, just stating facts and some opinions based on a deep understanding of this stuff (i had to know it to communicate it to agents and clients and answer the hard questions coming at us). It would be nice for a change to see someone, somewhere give AIG/Chartis some positive feedback for our commitment to the Gov’t and taxpayers for their investment. Lord knows, it is an undertaking, to say the least, to pay that kind of money back in 3 years. The insurance marketplace is more competitive with AIG/Chartis as one of the carriers, than a marketplace without it. That is better for agents and clients alike. And again, I personally thank you for allowing us the opportunity to find our feet again and continue to provide insurance solutions to over 70M customers in over 160 countries worldwide. We at AIG/Chartis truly appreciate it.
Employee,
The marketplace would have absorbed the risk taken but at different price and conditions.
The example you give with public entity business would have been absorbed by the likes of Ironshore, CVStarr, Travelers, etc who all have public entity practices.
As far as paying back the debt AIG still owes the federal government about $80 billion. As for people at the Fed/Treasury being brighter, they wrote provisions in the tax code that gave billions in tax breaks to companies like AIG receiving federal aid. This makes the company seem stronger financially that it normally is.
With AIG/Chartis going forward, it has been stripped of some of its most valuable assets (Hartford Steam Boiler, Transatlantic Re, important Asian operations, etc) and many of its most talented underwriters jumped ship to work with other carriers. The combination of the loss of important business units and key employees puts the company in pretty bad shape.
These are just my two cents….
Employee, you are coming across pompous because you are now assuming the rest of the insurance industry cannot handle the volume of business AIG writes, but yet the rest of the insurance industry was not facing closing it’s doors. Hmmm I wonder which companies are better? Plus, how can you claim a profit when the Federal government waived paying taxes into the IRS? You just took money out of the IRS coffers and put them back into paying some of your debt out of your “profit.” And truly, how much is AIG paying back? Much of it appears to be through stock sales. I wish the stock would fall to $1.00 a share and then see you post your thoughts. You wouldn’t be talking so high and mighty about AIG paying back the Fed, because it would be at a huge loss. Doesn’t sound like AIG is playing fair, but more like a spoiled little child. I, for one, voted for it to fail at the beginning, mostly because we are not a socialist society.
There is a whole laundry list of wrong doings by this company going back to the bid rigging scandals years ago in cahoots with Marsh Mac. They then get into this scandalous behavior in their Financial dept and start playing with the sub prime mortgage paper right up to their eyeballs. Then, when they were taking the tank, the government came riding to the rescue and bailed them out to the tune of $180 Billion with a B because they were too big to fail. The Politicians didn’t want them to fail since they were handling the Congressional Pension Plan. God forbid if that were to tank. I for one have no sympathy for AIG. They should be made to pay every cent back with interest.
Look at Berkshire’s insurance operations (Buffett’s) versus Chartis (Benmosche). Berkshire posted an underwriting gain versus a understated underwriting loss for Chartis.
I say understated as the values on future losses for exposures like worker’s compensation, asbestos, construction defect, etc are understated.
As for letting AIG fall, this should have happened in September 2008. The government has taken too much investment in subsequent bailouts and favorable tax treatment to let AIG fail.
I think one should follow Mr. Buffett’s insurance operations.
Hey 102, before you start singing the praises of Buffet too much, are you aware that Berkshire Hathaway has been in arears on their Federal Taxes for 10 years? Buffet talks about the need for the rich to pay more taxes and hosts $35,000 per plate fund raising dinners for Obama and meanwhile has a small legion of tax attorneys trying to avoid paying taxes. He will end up negotiating some loopholes to avoid paying his “fair share”.
Buffett has not done anything illegal. I agree with you that tax system needs to be changed. Corporate taxes need to be closed and loopholes need to be eliminated. These are NOT my recommendations but those of Bowles-Simpson.
I do not think anything will happen as this is an election year.
While Buffet may not have done anything illegal, it is not right for a crony capitalist like him to lecture anyone that they should pay more taxes when he isn’t. If he really believes what he has been saying, let him cut Turbo Tax Tim a check for the back taxes. We have the most screwed up 2,000 page tax code in history and is rife with corruption. The only way for taxes to be cleared up in this country is to go to a fair or flat tax and eliminate all the special interest loopholes. Politicians won’t do that because they are in the pocket of the special interests. If we do what Obama wants to do and raise the tax rate on the big boys, they will just pass it on to the consumer ie higher gas prices at the pump if you tax Exxon at a higher rate. Kind of a vicious circle, isn’t it?
Baxter, you got me in a debate mood today. Probably makes me sound angry, but you know what, there have been lots of groundless blame and poor arguments not based in fact that cloud the issue for all…and i am going to respond. Point 1). The types of programs AIG has in place in many areas nationally and internationally are well outside the scope of typical P&C business. The government is required to put their insurance to bid. No other carrier has ever been able to bid on many of these unique programs, as there is no market alternative. And that includes lloyd’s/non-admitted/CV Starr, etc.. The Traveler’s and Chubb’s of the world can’t touch this stuff. If so, they would have taken this over years ago with better pricing or layered the coverage to compete against us. It simply doens’t happen. We are not talking BOPs, GL and WC here… So no, the market can’t handle many of the things AIG put in place years ago…they simply can’t be duplicated by layering. That is fact. Read prior media articles in 2008/2009 or ask the Fed yourself instead of debating with me. Point 2) Nobody said our profit in 2011 was due to underwriting profit and investment gains. A little bit was and they did make a small profit from that, but $16.6B was due to deferred tax losses taken in 2011 (see point 3). At least the UW and investment gains, though slight, are progress from horrendous historical losses in prior years trying to move past the crisis. And don’t forget, 2011 was a horrible year for P&C carriers due to CATs everywhere. And we are major global, so we get the lion’s share of the losses from tsunami’s and earthquakes losses from asia and the world that our competitors in the US don’t have any, or a tiny fraction of exposure to. Point 3) AIG did not skip paying taxes – big misconception. Read the Consolidated Financial Stmts for y/e 2011. Well laid out there. As you seem to have forgotten, AIG took historical massive losses in 2008 and 2009 and some of 2010 as it’s assets were sold off, businesses devalued, etc… this resulted in legal tax code tax losses (not gains) that could be written off for any US company. AIG decided instead to defer the losses until y/e 2011 and take them as a chunk. The IRS did not ‘write them off’. Why would they possibly write them off..and the fed changing tax code to AIG’s benefit…i wish i lived in that world. Laws are getting tighter to prevent this from happening again..not looser to let companies like AIG off the hook. Do you think that would fly in the world of transparency that AIG lives in? Point 4). Playing fair? AIG is the most regulated public company in the history of business right now (arguably, for the right reasons). We are scrutinized on every single thing we do operationally and how it is reported. Do you know how tough it is to operate with those constraints that none of our competition have, and won’t have going forward. We can’t even take our best partner agents to a local event location to thank them for their efforts year-end without gov’t and public scrutiny. Our competitors get to take them on big cruises….It would be nice if the gov’t just kept a close watchful eye on us and let us run the business as any other insurer gets to run it’s business, but we don’t have that. We (not the employees, a small tiny fraction of persons in the financial products and exec mgmt ranks) made the bed, so we have to lay in it. It is what it is. Not crying over that spilled milk. However, I lose business daily in open market competition, just like any other carrier in a free marketplace. I have a great product/service mix for the division i work in and we are a great competitor and provider of insurance to the marketplace. Agents and clients alike value what we bring to the table each day. Curious though…do you not see how the media, congress, the Fed/Treasury, joe public at-large treats AIG…we are continually bashed, almost daily, for years. Our good independent agency base is helping us keep our reputation intact..and they represent all the other carriers too. AIG is not making the rules here Baxter, they are being decided by everyone but us. The Gov’t is certainly not paving the way for us and making it easier for us to do business..just the opposite. You can’t see that because you are not close enough to it to daily to see it. Us AIG/Chartis employees live with it daily, yet still hold our head up and compete as best we can with the tools afforded us to right the ship, get the gov’t out of our operations and let us get back to an objective marketplace to compete in so we can add value to our agents and clientele. AIG parent has been de-risked of all that toxic credit default swap stuff that killed the world’s financial marketplace, but remember also, we didn’t develop that stuff, Goldman Sachs did, and they marketed to the world…literally. We just put some insurance on top of it and paid the price for hedging the bet against a housing market downturn to the historical extreme it took (as did entire countries). No excuses, shame on us for overloading that position, but the P&C side and life side of the biz, which accounts for the vast majority of AIG employees, didn’t create or know about those issues until the world did. Bid rigging scandals were perpetrated by literally, a few people, and against AIG policy….they were dealt with swiftly, as they should have been. That doesn’t amount to a company of thiefs and swindlers. Check out insurance journal each week, someone is caught breaking the law in this industry. It happens, regardless of controls in place. It doesn’t make an entire company of 44k+ employees bad people. Sorry for venting…would rather discuss this stuff in coffee houses than IJ comments section…but here it is. Have a better day…
Employee, you sound like a decent, hard working guy who is trying to operate in a tough environment. It was largely brought on by certain individuals in the AIG hierarchy who made huge mistakes, many of which were illegal. Why aren’t they in jail? Why are Goldman Sachs guys not in jail for their misdeeds which have cost the taxpayers billions of dollars? Instead of being in jail, they are working in the White House as we speak. How many CEO’s have there been at AIG since Greenberg stepped down? It is a very unstable environment in which to work and we the taxpayers are still owed the $80 Billion large. How much profit will AIG have to make to pay this monstrous debt? I say it will never be fully paid off. It is kind of like our national debt of $15Trillion. Never to be paid off in several lifetimes. It is not a pretty picture.
Employee, I agree with much of what you’re saying. Unfortunately, I still don’t agree with government involvment in the private industry (in regards to bailout, not regulation). (There are always exceptions to their involvment, but not to be discussed here.) I’m not faulting you for being thankful the government bailed out AIG. Heck, I accepted that $400 tax credit a few years ago like everyone else did. Did I agree with it? No, but I accepted it. What has been done is done. Onward we go!
Thanks Agent…the vast majority of employees at AIG/Chartis are very hard working and we value a fair objective marketplace..laissez faire style. We are indebted to the U.S. for giving us a 2nd chance and we are working hard to ensure it was not a wasted effort and that we can bring back a stable competitive carrier to the marketplace as quickly as feasible. We certainly appreciate the chance afforded to us by any agency that has an appointment with us. We are making big strides in short time frames, but i understand there is a way to go. Much obliged…
AIG/Chartis is bearing the brunt of vitriol that should be directed at Goldman Sachs. If AIG didnt insure the mortgage backed securities crap cooked up by the thieves at GS, would AIG be in this position now? I say no….I am not an AIG/Chartis employee. As for the tax laws – the Fed/Treasury enforce the laws the CONGRESS writes folks. It’s those idiots that allowed changes in the law for folks who have poor credit and no savings to get mortgages and then default on them. Who packaged that crap and resold it and then called the insurance on it? GOLDMAN SACHS, GOLDMAN SACHS, GOLDMAN SACHS and Fannie Mae Freddie Mac Charlie Rangel Chuck Schumer BILL CLINTON. THOSE ARE THE FOLKS THAT DESERVE THE VITRIOL AND TO GO TO PRISON.
Geek, there is plenty of blame to go around. In this case, Congress and the government started the ball rolling. Progressive leaders in both parties promoted this disgrace and the investment bankers and insurance companies all over the world thought they could game the system. When it all imploded, the taxpayers had to bail them all out. By the way, several of the former executives of Goldman Sachs are now working in the Obama Administration. What does that tell you?