October 5, 2008

Independent Broker/Dealers Not on AIG's Keeper List

New CEO lays out massive asset sale in bid to revamp largest insurer

The new chairman and CEO of AIG, Edward Leddy, disclosed in an analysts conference call on Friday, October 3, that the company has begun a broad initiative to shrink the company and improve its capital structure by selling assets to help pay back the current $61 billion in Federal Reserve Bank loans that it had borrowed as of September 30 which it needed to stave off collapse two weeks prior.

Leddy said AIG is "exploring divestiture opportunities for our businesses," will follow what he called a "deliberate process"--its advisors for the asset sale are the Blackstone Group and JPMorgan--and that it hoped to sell a broad range of businesses and use the proceeds to "repay our obligations to the Government," which AIG must do within two years, and "address our capital structure."

Leddy promised only that AIG will retain its U.S. property and casualty businesses and its foreign general insurance and life insurance operations. That would leave out its independent broker/dealer network of some 7,500 registered reps at AIG Financial Advisors, FSC Securities, and Royal Alliance, along with its U.S. life insurance business.

The new CEO said that some $53 billion of the $61 billion in Fed loans has been used to shore up the financial products unit which helped cause its near collapse, but also to fund daily operations, since "our CP [commercial paper] dried up." He promised that a "strong, viable, and nimble AIG will emerge" after it sells "a number of extraordinary businesses," and that in its massive asset sale AIG would display a "clear bias toward selling our operations to brand-name companies with strong balance sheets."

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