AIG Insurance Company The History Term Paper

Length: 10 pages Sources: 6 Subject: Business Type: Term Paper Paper: #53926208 Related Topics: Bailouts, Goldman Sachs, Arthur Miller, Electric Vehicle
Excerpt from Term Paper :

, 2008). There are two formats of insurance coverage that AIG specializes in:

1. Auto Insurance

2. Travel Insurance

Auto insurance

The primary profits and insurance coverage offered by AIG for auto insurance services were through its subsidiary by the name of AIG Direct (can be accessed on aigdirect.com). The service package that they offered their clients included insurance for privately owned vehicles, motor bikes, commercially-owned vehicles and as well as the recreational transport (Schneiderman et al., 2008).

Some of the major subsidiaries of included the complete subsidization of the online auto insurance specialist called the 21st Century Insurance. This takeover took place in the year 2007 and cost AIG $749 million at purchase. This subsidiary proved to be the most beneficial move for AIG in the year 2008 where they experience the highest record of losses with the recession. They directed all of their business dealings towards the 21st Century Insurance. The following year, AIG sold the 21st Century Insurance subsidiary to the Farmers Insurance Group for a total of $1.9 billion, making a huge profit from the amount it had initially invested in the company (Schneiderman et al., 2008).

Travel Insurance

The main subsidiary that AIG utilizes to sell its travel insurance services and packages is the Travel Guard. The headquarters of the Travel Guard are in Stevens Point, Wisconsin, while it has outlets in different regions of the country (Schneiderman et al., 2008).

The company's growth

Its strongest point

The figure below illustrates the strongest show that the AIG stocks had in the most loss-prone year for them, i.e. 2008. This was definitely the turning point for the company to turn things around in the second half of the year after suffering tremendous loss for a majority of the first half of the year. The important aspect to note here is that, even though AIG stocks closed lower than their opening rate, the level of fluctuation was not as drastic as it should have been considering the humungous losses that the company was experiencing (Sjostrom, 2009).

Crisis (or weaknesses)

The year 2008 was definitely the biggest crises that AIG had to face. AIG had to sell out most of its subsidiaries and give up on its sponsors to cut down their losses. AIG did manage to come back in the second half of their most disastrous year but despite that when we compare the yearly output for the second half of 2008 to the second half of 2007, the difference can be very clearly seen (illustrated in the figure below) (Sjostrom, 2009):

The highest and the lowest peak in terms of growth

The figure below is an illustration of the overview of the highest and lowest points of the AIG stocks over the years. The figure is an average depiction of the performance of AIG in the industry and how it had grown into such a massive structure within the United States. Perhaps the highest point of growth came after the huge bailout explained earlier by the Federal Bank which allowed AIG to really expand its horizons with a guarantee of yearly loans and collaterals available against the many subsidiaries it owned (Sjostrom, 2009).

The rise of AIG

Its participation in government and President Obama

It is no secret that the Bush administration did give AIG a lot of leeway in terms of the loans that they could take through the introduction of the secured credit facility. However, the same hospitality was not give during the Obama administration that followed. The ironic aspect here is that President Obama voted in favor of the bailout as a

...

In response to the overall reimbursement proposed from AIG, the President said "It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?" he further added to that by saying "In the last six months, AIG has received substantial sums from the U.S. Treasury. I've asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole" (New York Times, 2009). It becomes obvious form these statements that AIG will not have the unparalleled and unquestioned support from the Obama administration as it did during Bush's reign.

The historical bailouts

1. The $70 billion bailout enacted in 2008 to assist the big banks regain control over finances benefitted AIG as the focus of this bailout was also on auto insurance which is one of AIG's primary services.

2. The Secured Credit Facility bailout of $85 billion that allowed AIG to regain financial balance by warranting the assets and stocks of its subsidiaries

3. The housing finance program from AIG anticpates another bailout amounting to $20 billion from the Treasury Department (New York Times, 2008b)

AIG's present status quo as of 2010

It is quite an obvious assessment to say that the bankruptcy and government pressures that AIG currently faces will not be something that it could recover from. In fact, this might actually be the end of the company's profile in the insurance industry. What I assess is that the AIG sticks will end up being part of the Hedge Funds machinery. The Hedge Funds will be the last straw for AIG as the money that AIG now has to pay back due to the losses it is facing is not being stored in escrow and will be stored in the Destsche Bank which is owned by Hedge

Funds. The following figure explains how and why this is the assessment I make.

Bibliography

Gretchen, M. (2008). "Behind Insurer's Crisis, Blind Eye to a Web of Risk." NY Times. Accessed on October 28th, 2010 from http://www.nytimes.com/2008/09/28/business/28melt.html

Mark P. (2008). "Goldman, Merrill Collect Billions After Fed's AIG Bailout Loans." Bloomberg News

Marsh, B. (2008). "A Tally of Federal Rescues." New York Times. Accessed on October 28th, 2010 from http://www.nytimes.com/imagepages/2008/09/28/weekinreview/20080928_MARSH_GRFK.html

New York Times. (2008a). "An Insurance Giant, Brought Down." Accessed on October 28th, 2010 from http://www.nytimes.com/imagepages/2008/09/27/business/20080928_MELT_GRAPHIC.html. Retrieved 2008-09-27

New York Times. (2008b). "Losses in Perspective" Accessed on October 28th, 2010. (Graphic of AIG quarterly net profit & losses over five years, comparing Finance vs. Insurance activities.)

New York Times. (2009). "Obama's Statement on A.I.G." Accessed on October 28th, 2010 from http://thecaucus.blogs.nytimes.com/2009/03/16/obamas-statement-on-aig/

Schneiderman, R.M; Philip C., Celena F., Elisabeth G. And Vikas B (2008). "How a Market Crisis Unfolded: Some of the key events in the upheaval.." New York Times. Accessed on October 28th, 2010 from http://www.nytimes.com/interactive/2008/09/15/business/20080915_TURMOIL_TIMELINE.html

Shelp, R.K. (2006). Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG. Hoboken, New Jersey: Wiley.

Sjostrom, Jr., W.K. (2009). The AIG Bailout. Accessed…

Sources Used in Documents:

Bibliography

Gretchen, M. (2008). "Behind Insurer's Crisis, Blind Eye to a Web of Risk." NY Times. Accessed on October 28th, 2010 from http://www.nytimes.com/2008/09/28/business/28melt.html

Mark P. (2008). "Goldman, Merrill Collect Billions After Fed's AIG Bailout Loans." Bloomberg News

Marsh, B. (2008). "A Tally of Federal Rescues." New York Times. Accessed on October 28th, 2010 from http://www.nytimes.com/imagepages/2008/09/28/weekinreview/20080928_MARSH_GRFK.html

New York Times. (2008a). "An Insurance Giant, Brought Down." Accessed on October 28th, 2010 from http://www.nytimes.com/imagepages/2008/09/27/business/20080928_MELT_GRAPHIC.html. Retrieved 2008-09-27


Cite this Document:

"AIG Insurance Company The History" (2010, November 03) Retrieved October 24, 2021, from
https://www.paperdue.com/essay/aig-insurance-company-the-history-7152

"AIG Insurance Company The History" 03 November 2010. Web.24 October. 2021. <
https://www.paperdue.com/essay/aig-insurance-company-the-history-7152>

"AIG Insurance Company The History", 03 November 2010, Accessed.24 October. 2021,
https://www.paperdue.com/essay/aig-insurance-company-the-history-7152

Related Documents
Insurance and Financial Services Professionals
Words: 1679 Length: 6 Pages Topic: Finance Paper #: 76996014

Briefly describe your career field or a field of interest to you. Both the insurance and financial services industries play a very critical role within society. As it relates to insurance companies, they help to safeguard and mitigate loss relates to unexpected events. They also help to lessen the financial burden associated with the eventual recovery from the loss event. Earthquakes, Floods, Hurricanes, and other natural disasters are very difficult to

AIG Financial Bailout: American International Group AIG
Words: 663 Length: 2 Pages Topic: Economics Paper #: 80413304

AIG Financial Bailout: American International Group (AIG) Inc. is one of the biggest insurers worldwide that was bailed out by the U.S. government in 2008. The American government took control of this company in deal worth $85 billion that reflected the intensity of its concern regarding the threat a collapse could pose to the financial system. As part of the deal, the government effectively obtained a 79.9% stake at the firm

Tarp and American Auto Companies
Words: 2747 Length: 8 Pages Topic: Economics Paper #: 73839289

Yet, today, they sell only about 47% and this market share loss has accelerated over the past decade (Sullivan, 2008). The major issue, according to Sullivan, is the inability of the Big Three to effectively compete with their more efficient and market savvy Japanese rivals, even on their home turf. Opponents of the auto industry bailout feel that placing more money into a failed business strategy makes no sense

Stakeholders Is Any Company Too Big to
Words: 1073 Length: 3 Pages Topic: Government Paper #: 9025749

Stakeholders Is any company too big to fail? That was the question of the day facing political leaders in September 2008 as the market was rocked by a series of announcements from AIG and other companies concerning what some experts would call catastrophic losses from mortgage-backed securities. AIG happened to be the ringleader of those companies as it announced that it lost nearly $25 billion in one quarter. The U.S. government

Public Law 110-343 the Crisis
Words: 3082 Length: 7 Pages Topic: Economics Paper #: 6524679

Conclusions -- Was TARP Necessary -- A five member Congressional committee echoed a number of criticisms regarding TARP that many consumers, academics, and fiscal analysts were considering. What exactly was the Treasury's strategy with the $700 billion dollars for the supposed bail out? How can Treasury explain the significant gaps in their ability to find hundreds of billions of taxpayer money? In a nutshell, it appears that the departments that

Allstate Started Life in 1931
Words: 1794 Length: 6 Pages Topic: Economics Paper #: 15831655

It is vital that information is gathered, and then competently analyzed. I believe that I can do this, because this exercise has illustrated to me some of the tools and steps required to think critically about the market. I believe that this exercise has also highlighted the value of thinking creatively about the market as well. The market has a wide range of instruments available for investing. Stocks may