Five common AIG questions answered - Sep. 16, 2008
Page 1 of 3
Symbol
Home
Business News
Markets
Personal Finance
Retirement
Subscribe to Money
Make CNNMoney my Homepage
Add to Favorites
Keyword
Technology
Luxury
Small Business
Complete Coverage
SPECIAL REPORT Issue #1: America's Money - Every day on CNN
5 questions: Why AIG matters to you
Video
Top
Stories
My Portfolio
Most Popular
Stories
CNN.com
Most Popular
Videos
1. Fed leaves rates unchanged
Customers are wondering if the insurer's woes will affect them. Here's why you
should care - even if you aren't a customer.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: September 16, 2008: 2:46 PM EDT
EMAIL | PRINT |
NEW YORK (CNNMoney.com) -- American International
Group is the world's largest insurer and at the moment, Wall
Street's biggest worry.
AIG, better when boring
SHARE |
Fortune
RSS
2. Oil at 7-month low on Wall Street woes
3. Gas prices rise another penny
4. Consumer prices ease slightly
5. House vote expected on oil drilling
The insurer is struggling to raise cash while economists and
investors debate whether or not it should get a government
bailout. Despite the company's importance, the average
American is probably not sure how, or why, its problems will
affect them.
Here are five key questions and answers about AIG's
current woes and what they mean to you.
More Videos
I have insurance through AIG. How worried should I be
about the problems at the company?
At least in the short term, you probably don't need to be
worried at all. The problems are with the AIG holding
company, not the individual insurance company subsidiaries
that you do business with, according to a source with New
York State's insurance regulator.
5 questions: Why AIG matters to
you
Consumer prices ease slightly
Stocks slide at the open
Stocks poised for mixed open
Even if AIG's holding company is forced to file for
bankruptcy court protection, there's a good chance that the
subsidiaries will continue to operate normally with no
disruption in claims payments. That has happened in the
case of other insurance holding companies bankruptcies in
the past, such as Conseco (CNO).
Why they let Lehman die
Issue #1: America's Money Everyday on CNN
US Indexes
Fortune 500 Movers
Markets
Dow Jones
Last
Change
11,050.06
132.55 / 1.21%
Nasdaq
2,202.03
22.12 / 1.01%
S&P 500
1,211.55
18.85 / 1.58%
104 10/32
Yield: 3.47%
1 euro = $1.411
-0.016
10-year Bond
U.S.Dollar
September 16, 2008 3:50 PM ET
What guarantees are there that my claims will be paid?
symbol
Sponsored by
SYMBOL LOOKUP
Typically, if an insurance company falls into financial distress and is at risk of having claims that
exceed the assets it holds to make those payments, the insurance regulator in its home state will
take control of the firm and make payments.
More Galleries
GM charges up the Chevy
Volt
The state regulator will not only use the firm's own assets to make those payments but if necessary
can also make payments out of a state fund into which all insurers in the state are required to pay.
General Motors gives the world an upclose look at its new electric car. More
This guarantee applies not just to traditional insurance policies but also to retirement products that
have a promised payout, such as annuities.
But there are limits to the payments that will be made to customers that vary depending on which
state a particular AIG subsidiary is based, according to Joseph Belth, professor emeritus of
insurance at Indiana University and editor of The Insurance Forum, a newsletter often critical of the
industry.
Retire without taxes
Only one savings plan gives you the
chance to free yourself from taxes in
retirement. Are you making the most of it?
More
3 couples who took the
Should I be thinking about changing my policy away from AIG to another insurer?
http://money.cnn.com/2008/09/16/news/companies/aig_questions/index.htm
9/16/2008
Five common AIG questions answered - Sep. 16, 2008
While credit rating agencies downgraded debt held by AIG
(AIG, Fortune 500) on Monday, AIG's ratings are still
considered investment grade and the company's insurance
subsidiaries are considered to be secure, at least for now.
Page 2 of 3
Sponsored Links
plunge
When we asked boomers where they wanted to retire,
almost half said by the water. Here are three pairs of
retirees who got their feet wet. More
Top-Rated MBA Online
Earn Your MBA In 2 Years. No GMAT
Required. 100% Online Program!
www.FloridaTechOnline.com
Belth said changing insurers is not a simple decision.
What’s your credit score?
"A lot depends on what kind of insurance you talk about," he
said. "If you're talking about life insurance, you have to think
about whether you can qualify with a new insurer, if your
health has changed. But it's something you have to consider
if the ratings decline into the vulnerable range."
The U.S. Average is 692. See your 2008
report and score now for $0!
FreeCreditReport.com
Name
Buy a link here
Address
City
State/Pr
Why should I care about problems at AIG if I'm not a
customer?
Zip/Postal
E-mail
Continue
AIG is by far the world's largest insurer and its stock is found
in many mutual funds, including any S&P 500 index fund. It
is also a component of the Dow Jones industrial average. All
by itself, it's been responsible for dragging the Dow down
more than 400 points so far this year.
Privacy Policy
AIG is also active in the business of credit default swaps,
complicated financial instruments used by investors to
protect themselves from bond defaults. Lehman Brothers
(LEH, Fortune 500) was another major player in that field. If
both go away, it would create a tighter credit market for
consumers and businesses trying to get loans.
For this reason, there is a debate about whether the Federal
Reserve will agree to lend the company the tens of billions
of dollars it needs to cover its short-term funding needs or if
the Fed will try and get private firms to assist AIG instead.
AIG is an insurer, not a lender. Why do I keep hearing
about its problems with subprime mortgages?
All insurers take money they collect in premiums and invest them in different forms of assets. The
idea is to make money on those investments so that the insurer can keep their premiums low and
attract more clients.
But AIG made a bigger investment into securities that were backed by subprime mortgages than
most other insurers. As defaults and foreclosures of those loans rose, the value of those securities
fell, creating big problems for the firm.
In the past nine months, AIG has reported net losses of more than $18 billion, largely due to its
exposure to bad mortgages.
First Published: September 16, 2008: 12:19 PM EDT
AIG shares plunge again in cash scramble
Time to toss AIG from the Dow
Ex-CEO's missteps still haunt AIG
© 2008 Cable News Network. A Time Warner Company. All Rights Reserved. Terms under which this service is provided to you. Privacy Policy
Home
Portfolio
Advertise with Us
Calculators
Contact Us
Magazine Customer Service
Newsletters
Podcasts
Download Fortune Lists
RSS
Reprints
Mobile
Widgets
Press Center
Career Opportunities
Site Map
Special Sections
User Preferences
Conferences
Business Leader
Council
Live Quotes automatically refresh, but individual equities are delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. Market indexes are shown in real time, except for
the DJIA, which is delayed by two minutes. All times are ET.
* : Time reflects local markets trading time. † - Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. Disclaimer
Copyright © 2008 BigCharts.com Inc. All rights reserved. Please see our Terms of Use.MarketWatch, the MarketWatch logo, and BigCharts are registered trademarks of MarketWatch,
Inc.Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. All Times are ET.Intraday data provided by Interactive Data Real-Time Services and subject to
http://money.cnn.com/2008/09/16/news/companies/aig_questions/index.htm
9/16/2008
Five common AIG questions answered - Sep. 16, 2008
Page 3 of 3
Sponsored Links
What’s your credit score?
The U.S. Average is 692. See your 2008 report and score now for $0!
FreeCreditReport.com
Top-Rated MBA Online
Earn Your MBA In 2 Years. No GMAT Required. 100% Online Program!
www.FloridaTechOnline.com
Buy a link here
Features
Crisis on Wall Street
Stocks recover after Fed surprise
Wall Street turns higher, after initially tumbling
on Fed decision to hold rates steady a day after
huge market meltdown. More
• Bonds tumble as Fed leaves rates steady
• Dollar up vs. yen, down vs. euro
Fed leaves rates unchanged
Central bank disappoints investors who hoped it would respond to
financial market woes with another rate cut. More
• Read the Fed's statement
• Ex-AIG chief mulls his
options
• AIG's cash hunt in high gear
• Why AIG matters - 5
questions
• Fuld may go to Washington
• WaMu shares stabilize
• N.Y. Fed: $50B into Wall
Street
• Goldman: Big profit plunge
• Your money is still safe
the Terms of Use.Historical, current end-of-day data, and splits data provided by Interactive Data Pricing and Reference Data.Fundamental data provided by Hemscott.SEC Filings
data provided by Edgar Online Inc..Earnings data provided by FactSet CallStreet, LLC.
http://money.cnn.com/2008/09/16/news/companies/aig_questions/index.htm
9/16/2008