Timeline: AIG Developments Since U.S. Bailout

March 16, 2009

American International Group Inc., once the world’s largest insurer, nearly collapsed last September under losses from bad mortgage bets made by a financial products unit. The U.S. government has since stepped in with up to $180 billion in financial support and has said it may still have to help AIG more. The following is a timeline of events since AIG was first rescued by the United States last year.

Sept. 16, 2008 – AIG avoids bankruptcy thanks to an $85 billion United States rescue that gives the government a 79.9 percent stake in the insurer.

Sept. 18 – AIG names Edward Liddy, former Allstate chairman, as chairman and chief executive succeeding Robert Willumstad, who steps down after three months on the job.

Oct. 3 – AIG announces broad plan to sell assets to repay its loan from the U.S. government. Moody’s Investors Service cuts AIG’s debt ratings by one notch, citing the company’s plans to sell assets to pay off debt, leaving the insurer with fewer businesses to rely on. The downgrade leaves AIG with an “A-3” rating, the seventh highest out of 10 investment-grade levels.

— Standard & Poor’s revises the outlook on its ratings of AIG to “negative” from “developing.” S&P has an “A-minus” rating on AIG, four notches above speculative, or “junk” status.

Oct. 10 – AIG says it has borrowed $70.3 billion as of Oct. 8. AIG draws fire on news it had spent $200,000 on hotel rooms and $23,000 on spa services days after it got the emergency loan from the government.

Oct. 15 – New York Attorney General Andrew Cuomo says he is investigating what he contends is “unwarranted and outrageous” spending by AIG. Cuomo said he was seeking a full accounting of “bonuses, stock options, severance payments, gratuities, benefits, junkets, and any and all other perks.” Cuomo wants AIG to recover or rescind these payments.

Nov. 6 – AIG says the total owed under its $85 billion credit facility from the United States stands at $61.3 billion as of Nov. 5, including interest and fees. AIG companies also borrowed $19.9 billion under a separate $37.8 billion securities lending agreement, raising to $123 billion the total amount the government has put at AIG’s disposal.

Nov. 10 – AIG posts a record quarterly loss, hurt for the fourth consecutive quarter by write-downs on assets linked to subprime mortgages and capital losses. It says its third-quarter net loss is $24.47 billion, or $9.05 a share, compared with a year-earlier profit of $3.09 billion, or $1.19 a share. Over the four quarters the loss has totaled $42.5 billion.

Nov. 25 – Liddy is to receive $1 in salary in 2008/9, and there will be no 2008 bonuses for the company’s seven most senior executives. Fifty more AIG executives will be locked out of pay raises in 2009, according to AIG.

Dec. 2 – AIG and the government say they have reached an agreement to clear the insurer of its obligations on about $53.5 billion in toxic mortgage debt. The Fed has established two funds to hold mortgage assets linked to AIG.

Dec. 22 – German reinsurer Munich Re says it will buy AIG’s HSB Group for $742 million to expand its U.S. business. This is the largest asset deal reached by AIG since October when it unveiled its plan for asset sales to raise funds to repay the government bailout.

Jan. 26, 2009 – AIG says it is working with Bank of America Corp. and Merrill Lynch to sell a fund management business that operates 15 funds with more than $12.4 billion in assets under management as of Sept. 30.

March 2 – Treasury and Fed announce a third new aid plan for AIG, putting $30 billion more at its disposal, and easing terms and conditions to give the insurer a billion-dollar-a-year break on interest and dividend payments.

— AIG says the revised bailout preserves capital, thereby increasing the likelihood it can repay the government debt and revise itself into a smaller company with better long-term prospects.

— AIG reports a $61.7 billion fourth-quarter loss, the largest quarterly loss in corporate history.

March 14 – According to documents obtained by Reuters, AIG’s financial products unit is obligated to pay $220 million in employee retention payments for 2008, $55 million of which were paid in December and $165 million required to be paid by March 15. AIG Chairman Edward Liddy says in a letter to Treasury Secretary Timothy Geithner that the company will sharply cut remaining 2009 salaries for top executives of the unit and realign 2008 bonuses to tie them to restructuring and repayment targets. Chief White House economic advisor Lawrence Summers later calls the bonuses “outrageous,” but says Geithner had done all that was legally permissible to limit the payments.

March 15 – AIG discloses that several U.S. and European banks were beneficiaries of the taxpayer bailout of the insurer and said that more than $90 billion had been paid to various banks between the September bailout and the end of the year. The banks that received funds include Goldman Sachs, Societe Generale , Deutsche Bank, Barclays, Merrill Lynch and Bank of America.

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