What to ask AIG
The Committee on Oversight and Government Reform has asked Ed Liddy and the AIG trustees to testify Wednesday. Here are the questions that I would ask, given my recent piece on AIG.
- Are you going to be able to use all of your deferred tax assets? What level of sustained profitability does that imply, and how are you going to get there?
- Are you going to destack your Life and P&C subsidiaries to avoid double counting of subsidiary capital on a statutory basis?
- If relatively clean and simple subsidiaries like Hartford Steam Boiler and 21st Century got sold for bargain prices near where AIG bought them, and below book value, what hope does that offer for the value of the rest of AIG?
- You’ve lost a lot of money recently. What do you project to be your level of annual sustainable profitability to be over the next three years?
- There are rumors that AIG is slashing pricing to stay alive in the short run on a cash flow basis. Many competitors are alleging this. Is this true?
- What have happened to your efforts to sell AIA and your asset management arm?
- What has happened to your efforts to sell International Lease Finance?
- How is United Guaranty going to survive amid mounting residential mortgage losses?
- As you wind down AIG Financial Products are you finding “deadweight losses” where the subsidiary was fundamentally mishedged?
- How are you dealing with defections of key personnel, and bad employee morale?
- How are you dealing with increased surrender activity in your domestic life subsidiaries? Will you need more capital as a result?
- Are you going to try to sell Alico?
- Are you going to try to sell AIU?
- What are the core businesses that you are going to keep, and why are they worth keeping?
- How will AIG repay the US Government in full?
- How have you reduced risk in your asset portfolio?
That’s all, and I hope Mr. Liddy, who I have met and I think he is a bright guy, will do well. He is a bit of a bagholder in the AIG mess.
May 12th, 20093:06 am at
Great questions. I’d add one:
How do you know that employees unwinding portfolios aren’t deliberately mispricing in favor of counterparties? There is a real risk of moral hazard where a portfolio is being unwound & the counterparty is a potential future employer of those involved.
May 12th, 20098:27 am at
Good question, Nick. The same question can be applied to those who work with reinsurance, if opportunities with AIG are flagging. It is easy to win friends by being nice about treaty terms.