US Biggest Insurance Company On the Brink of Bankruptcy

[pioneer]

The US Federal Reserve has announced an $85bn (£48bn) rescue package for AIG, the country's biggest insurance company, to save it from bankruptcy.

AIG will get an $85bn loan, in return for an 80% public stake in the firm.

Why is AIG in trouble?

American International Group (AIG) has been hit hard by the credit crunch.

The company's main business is insurance, but not just household insurance for you and me.

The firm also provides insurance to large companies, and most importantly to banks.

If an investment bank did a big complex trade, AIG might be the company to insure them against the deal going wrong, through so-called credit default swaps.

AIG has been under financial pressure for some time after posting three quarterly losses in a row totalling $18.5bn (£10.3bn).

The losses were related to the problems afflicting housing and credit markets, with AIG playing a key role in insuring risk for financial institutions around the world.

AIG is a rich company, but its money is stuck in deals and investments that are either not easy to sell or difficult to value.

To survive, the company urgently needed cash, and the US Federal Reserve was the only organisation prepared to supply it. - BBC News

[bol-anon nga cebuano]

AIG was rescued by the government. see separate story...

http://news.yahoo.com/s/ap/20080917/ap_on_bi_ge/aig