American International Group Inc. has named two executives to lead its restructuring, and its chief executive warned that $120 billion in emergency federal cash extended to the insurer may not be enough.
CEO Edward Liddy, in a television interview on PBS on Wednesday, said that whether it would be enough was “very much a function of two things:
“One, our ability to stop the bleeding that we have in the financial products areas … Also, what happens to the capital markets.”
Liddy said the crux of the problem was declines in the market value of its credit default swaps, requiring it to post more and more collateral. He stressed that AIG was working to rid itself of thorny liabilities that drove $25 billion in losses over the past three quarters, and had shut down the financial products unit that was the source of the losses.
AIG said on Thursday that Paula Rosput Reynolds, a former chief executive of Seattle-based insurer Safeco, would become chief restructuring officer, overseeing divestiture of assets and serving as AIG’s main liaison with the Federal Reserve Bank of New York, which provided AIG with an $85 billion loan. The company has since received an additional line of credit.
Richard Booth, AIG’s chief administrative officer, is now also to be in charge of transition planning. Booth will oversee the separation of companies that AIG sells off.
Reynolds and Booth will report to Liddy, who was named AIG CEO in conjunction with the government’s bailout.
Separately, AIG said it hired New York public relations firm Burson-Marsteller to help it respond to the “huge volume of requests for information we are receiving from customers, employees and the media.”
A spokesman declined to say how much it will pay the firm for these services.
Spending at AIG has come under scrutiny since the federal bailout, leading the insurer to cancel several events it had planned, freeze bonus plans for officers of the financial products unit, and stop severance payments to former chief executive Martin Sullivan.
AIG, which had been the world’s largest publicly traded insurer, was pushed to the brink of bankruptcy by losses on credit default swaps it wrote to guarantee mortgage-linked debt.
Saved by the $85 billion federal bailout in mid-September, and the additional line of credit, AIG is scrambling to sell off parts of its business outside its insurance core in a bid to quickly pay off the government debt, which carries heavy interest and fees.
(Reporting by Lilla Zuill; Editing by Gary Hill)
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