WASHINGTON–American International Group's new Chief Executive Edward Liddy told insurance regulators today that the company's insurance units are sound and some may be sold off to satisfy the government's $85 billion bridge loan, according to a participant at the meeting.
Interviewed after delivering a closed briefing to the National Association of Insurance Commissioners meeting here, Mr. Liddy declined comment on whether the insurance or airplane leasing units would be sold and whether the number of policyholders dropping AIG as their carrier was increasing.
Yesterday he told CNBC that the company's core insurance business was "sacrosanct" and would not be sold. He did not define what that core business was.
Pennsylvania Insurance Commissioner Joel Ario said after the briefing that the AIG insurance companies are among the units with the greatest value. He said some may be sold and that, in fact, Mr. Liddy had fielded a number of inquiries on that point. "If there is an orderly disposition, competition for those companies [insurance units] will be fierce," said Mr. Ario.
Mr. Ario declined comment on whether there had been an uptick in policy cancellations and surrenders and whether in this situation, where the government has taken an 80 percent stake in the company, federal authorities could preempt state insurance regulators.
In addition to taking a stake in the firm and providing the loan, the government demanded a change in management. Mr. Liddy, a former Allstate CEO, took over on Thursday.
Commissioners at Mr. Liddy's briefing said he had assured them that the insurance units were sound.
In his interview with National Underwriter after the closed briefing, Mr. Liddy said that the insurance units of AIG are "absolutely safe and extremely well capitalized." A plan is being developed now to sell assets and will be made public "as soon as we can." Yesterday, he said he hoped to identify companies for sale in seven to 10 days.
One commissioner who sat in on today's briefing said that a number of plans were discussed.
Sandy Praeger, Kansas insurance commissioner and NAIC president, said in an interview that the briefing had given her the assurance that the units were safe.
She said it would be up to management to decide what units are sold, as it is with any company, but that the only thing that policyholders would notice would be a different name on their contracts.
Ms. Praeger said there was no indication given during the briefing that there was an uptick in surrenders or cancellations of contracts.
Mr. Ario said the balance sheets of the insurance units haven't changed and that "it is a victory for state insurance regulation because the strength of those operations had given federal officials the confidence that a solution should be developed for the company."
In a separate closed briefing Mr. Liddy gave to state legislators, lawmakers wanted to know if their constituents' value in contracts would be safe, according to one official who attended the session.
Legislators expressed concern that fear over AIG's soundness would produce a run on the bank, this source said. Those briefing regulators assured legislators that the companies are sound.
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