DealZone

Can AIG become small enough to fail?

March 1, 2010

What if AIG sold everything it had? How big a hole in the ground would be left? Perhaps something less than a crater but certainly more than a gopher hole, now that it has agreed to sell its Asian life insurance arm to Prudential of the UK for $35.5 billion. AIG CEO Robert Benmosche, who has been focused on getting as much as he can for the assets that once made up the AIG colossus, must have figured the deal was more lucrative than the Hong Kong IPO that had been in the works.

AIG is busy repaying a $182.3 billion government bailout it received at the height of the financial crisis. First to be paid back are a $16 billion special purpose vehicle and $25 billion taken out of a credit facility taxpayers set up for AIG. The Prudential deal won’t cover those debts, but next up is the pending sale of American Life Insurance Co, or Alico, to MetLife in a $15 billion deal held up by a tax question.

Earlier this month, Benmosche said AIG would shed enough assets to remain a global property-casualty and U.S. life and annuity operation at its core. AIG would become “not too big to fail,” he said in an interview with Contact. But having already been saved once, and with taxpayers now owning the company, the question of success or failure seems almost pointless.

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