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American International Group's new chief executive said the insurer plans to keep three core insurance components, but the rest of the company is up for sale if the price is right.

Speaking today during a financial analyst's conference call, Edward M. Liddy, chairman and chief executive officer for the New York-based insurer, said that the company, which as of Sept 30 had drawn $61 billion of the $85 billion credit facility the government has provided, may draw more, subject to need.

The company meanwhile will sell off assets in an orderly way to maximize their value in repaying the government loan, he said.

"This is not a fire sale," proclaimed Mr. Liddy in answer to an analyst's question.

AIG was forced to give the government a 79.9 percent stake in the business in return for the Federal Reserve providing an $85 billion bridge after losses in its investments in credit default and other financial vehicles that have gone belly-up due to the subprime loan crisis.

The government has given the company two years to pay back that loan, prompting the insurer to sell off its assets to pay back the loan as quickly as it possibly can, noted Mr. Liddy.

He said the time period the Fed has given AIG allows it to sell the assets in a flexible and orderly way. He indicated the company has received a lot of interest from buyers and AIG is set up with a number of financial entities to negotiate the sale of those assets.

The company said today it plans to hold onto its U.S. property-casualty and foreign general insurance businesses. It also plans to retain majority interest in its foreign life insurance operations, Mr. Liddy indicated, keeping a 60 percent interest. All other parts of the company may be sold off, subject to the sale price and need for capital to pay off the loan and ensure the solvency of the remaining operations, he said.

During the conference call, Mr. Liddy said that AIG will sell its personal lines unit but retain its private client group, which he said is essential to its p-c insurance marketing.

Concerning the sale of the assets, Mr. Liddy said the company does not intend to break up units, but to sell them as whole businesses to large corporations. "Larger is better," he said.

"I think the demand for these properties will be very, very high, and we will move expeditiously in a way to maximize their value," he noted.

The company is doing what it can to understand the value of the subprime-related assets, he said. This would help establish a floor for collateralizing those assets, making it easier to determine how much money AIG needs to cover those assets that are losing value.

Once that is established, he said the company will be in a better position to fully understand how much money it must raise to cover the defaults.

"We want to emerge from this with a capital structure that serves us well going forward," said Mr. Liddy.

He said AIG Financial Products, which is the major cause of its financial distress, is now in runoff and only remains in business to service the investments that are eating up so much capital.

Should the federal bailout package finally win Congressional approval, those bad assets AIG holds onto could be subject to purchase by the Treasury Department under the plan, said Mr. Liddy. However, he qualified the sale, saying that it would be done only if it made "economic sense."

He said while the company is in distress, some competitors are trying to take advantage of the situation, but it is holding onto clients. However, AIG will maintain underwriting discipline and pricing, not entering into soft market competition.

"You don't want to solve one problem and create another," he said.

When asked why the AIG board did not hold a shareholder's vote to approve the bridge loan, Mr. Liddy said time was of the essence, and if the company delayed the agreement with the Fed to hold the vote it would have had a "negative" impact on the future.

He would not rule out the need to go back to the Fed for more money, but he said the primary focus is the sale of assets and staying within the limits of the loan agreement.

After the sale of the assets has wound down and the government loan has been paid back, the new AIG will emerge stronger and more nimble, said Mr. Liddy.

"We want a company that can do well in the future," he said.

Special Reports /

AIG Divestiture of Assets Not Fire Sale, Says CEO Liddy

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