When $85 Billion

Just Isn’t Enough

If it were one of its own customers, American International Group would struggle to get a life insurance policy. The company took an $85 billion rescue loan from the Federal Reserve. It promised to sell pieces of itself to repay the loan, and gave the Fed the right to an 80 percent ownership stake. Now, A.I.G. has gone back to the Fed for $38 billion more. The move highlights how little may be left for shareholders.

Consider A.I.G.’s asset sales. The top lots on the block will probably be its overseas life and retirement businesses. If the company could sell all of these for, say, 10 times 2008 estimated earnings, it could bring in some $50 billion. The company’s United States life and retirement business might fetch about $20 billion if sold at eight times earnings, which would be closer to the valuation of a rival, MetLife, today.

Then there is A.I.G.’s aircraft leasing business, now on the group’s books at $7.5 billion. A.I.G. might collect another $10 billion selling things like a stake in the fund manager Blackstone and real estate like the Stowe Mountain Resort in Vermont. Add it all up and A.I.G. would have $87.5 billion on hand.

As of last Wednesday, A.I.G. had drawn down $61 billion from the Fed. Going back for more on Wednesday suggests it is close to exhausting the full $85 billion that the Fed originally offered. With the additional $38 million from the Fed, then, A.I.G. will owe the Fed up to $123 billion.