Insurance Finder

Sunday, as the large insurer American International Group Inc. was about to announce another record breaking quarterly loss, the Feds pumped in another $30 billion to buoy them up. Sunday as the embattled insurer prepared to report the biggest quarterly loss in corporate history.

Sources that are will informed with regard to this issue report that the AIG board has just approved another rescue package that contains more lenient terms with regard to government investments in its preferred shares, as well as a lower interest rate on a government credit line.

AIG is expected to make known further details on Monday when the company is to report on a fourth-quarter loss of about $60 billion.
To this date, this represents yet the third time that the United States government has had to step in, in order to save AIG, a company that was once the largest insurer by market value with a global dominance that possibly may have made it too large to fall.

It is generally agreed by financial analysts that if the government had allowed AIG to collapse, there would have been far-reaching consequences for the global financial system since the company is a guarantor of close to $300 billion of asset-backed securities and other debt.

In fact many still blame the government for making the financial situation worse when they allowed Lehman Brothers to fail.
CreditSights senior insurance analyst Robert Haines points out that the government in fact does not have the option of letting AIG totally go under.

He adds that many European banks would be hit hard if the U.S. government were to walk away from this situation and says that hopefully this third bailout will be the charm.

This redesigned bailout, in which the terms of an earlier $150 billion rescue are rearranged, represents the latest example of how as the global financial crisis widens, federal authorities are having to overhaul aid for top financial institutions.

Last week, in a bid to bolster the bank Citigroup Inc., which is already the recipient of billions of dollars in taxpayer funds, the government agreed to increase its equity stake to as much as 36 percent.

In Asia which news of this deal came out, the dollar rose against most other currencies.

DEBT COMPARED TO EQUITY
According to the terms of this deal, the interest rate on AIG's credit line from the government would be reduced so as to match the three-month London Interbank Offered Rate (Libor), which is presently at about 1.26 percent. This would have the affect of saving AIG about $1 billion a year.

This is because at the present time, AIG is paying 3 percentage points above three-month Libor on the $60 billion credit line.