American International Group, Inc. (AIG) has issued a statement challenging assertions that it may have to absorb around $30 billion more in write downs because of the way the company accounts for its securities.
A report in Bloomberg News–citing analysts and representatives of other companies that sold securities similar to the ones in question–stated that AIG may "value some of its positions at levels that don't reflect distress in the markets."
One analyst quoted in the story said AIG may need to write down an additional $28 billion on swaps covering European corporate loans and prime residential mortgages, as well as collateralized loan and debt obligations. The write downs would be necessary because of the declining market value of the assets underlying the swaps. These swaps, the story notes, guarantee assets not covered by the $152.5 billion federal rescue package.
AIG, however, disagreed with the assertions made in the story. In a statement, the company said, "AIG reports all its derivatives at fair value in accordance with U.S. GAAP including AIGFP's (AIG Financial Products) credit derivative portfolios." The company added it considers a wide range of information to determine the fair value for its credit derivatives.
AIG stated, "AIG has clearly described its valuation approach including key assumptions used for AIGFP's super senior credit default swap portfolio in its Form 10-Q for the quarter ended Sept. 30, 2008."
Asked if the company believes it will not have to absorb the write downs mentioned in the Bloomberg article, a spokesman said, "Yes, we stand by our valuations."
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