AIG Reported To Seek Another Big Cash Infusion

The New York State Insurance Department takes the lead in regulating AIG’s main insurance company subsidiaries.

David Neustadt, a spokesman for the New York department, said that, as far as he knew, the department had not been informed of the possibility of a $60 billion loss.

If it did know about such a loss, “it would be inappropriate to comment” before any official announcement, Neustadt said.

In other news regarding AIG, two insurers, AXA SA, Paris, and MetLife, Inc., are said to be interested in purchasing American Life Insurance Company, an AIG unit, according to a report from Bloomberg.

Spokespersons for AXA and MetLife declined comment and a spokesperson for AIG could not be immediately reached to comment on the Bloomberg report.

ALICO, domiciled in Delaware, had $33.5 billion in net premiums written in 2007 and net income of $737 million, according to Highline Data, an affiliate of National Underwriter and a unit of Summit Business Media, Erlanger, Ky.

A report by ProPublica, New York, a non-profit, public-interest news organization, raises questions about a potential tax issue and the impact that could result from the sale of ALICO, considered to be one of AIG’s most profitable units.

The issue centers on U.S. Internal Revenue Service ruling 2004-75, issued on July 12, 2004. The ruling requires that nonresident aliens receiving payments from contracts such as annuities from a U.S. life insurer are subject to a 30% withholding tax.

According to the ProPublica report, ALICO is saying that because it is an 80/20 company, a business in which 80% of its revenue is from overseas, it is not subject to the 2004 IRS ruling because such companies are not specifically mentioned.

But according to the report, the issue is unclear and the story quotes company executives who state that the matter has not been disclosed to potential buyers. The ProPublica report also quotes a consultant hired by ALICO as saying that if the company has to comply with the ruling, then it would have a negative impact on business and on the sale of the company at a price that would help AIG, the unit’s parent, repay what it owes the United States government.

An AIG spokesperson referred National Underwriter to a response posted under the article in which the company says that as a normal part of the divestiture process, AIG approached the IRS to affirm its position on the issue and that the issue is not material to ALICO. The response goes onto say the information would be disclosed to serious contenders for ALICO.