We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

American International Group (AIG) - Essay Example

Comments (0)
Name: Professor: Course: Date: American International Group (AIG) Financial product division The financial division activities in AIG are considered to be the principal cause that brought the company down. The AIG crisis did not result from state regulated insurance companies, but principally the crisis arose from the company’s financial products, which comprised written credit default swaps, derivatives and futures with a national amount of about $2.7 trillion, encompassing around $ 440 billion outstanding of credit non-payment swaps…
Download full paper
American International Group (AIG)
Read TextPreview

Extract of sample
American International Group (AIG)

Download file to see previous pages... These resulted when AIG was encountered with ratings downgrades. The company underwent demands of tens of billions of dollars for cash collateral on the credit default swops that were written by financial products and assured by the investing company. Some of the world’s biggest financial institutions managed to hedge their contribution in the risky credit default swap business living AIG struggling on its own (Roth and Buchwalter, 1). AIG selected the federal office of Thrift supervision (OTS) after purchasing a saving’s loan in 1999, which was an agency charged with supervision of savings, loan banks and economy associations. OTS became the primary regulator of the company. Notably AIG financial products are not a licensed insurance agency; therefore, it was not synchronized by the states. The financial product is primarily an investment that is based in London. It managed to evade control, as provided by the British financial services authority, principally because OTS, which was an equivalent regulator of the British regulatory body, had registered the AIG holding company. Nonetheless, even though OTS accepted its part as the holding company regulator, it should be understood that credit swaps were exempted from regulation by British policies thus preventing the states from regulating these instruments (Dinallo, 4). Collateralized Death Obligations Most people buy life insurance for the profit off their family members or those that rely on their on their earnings. Banks would buy a large number of life settlements to create the collateral pool which they would expect to begin making payment as earlier as probable. However, risks arise when the insurer fails to meet the death gain claim. This policy entails that investors will persist in paying out premiums on insurance and will eventually get the payout once a person dies. If the policyholder encounters his death earlier, this will entail that the returns will be immense. However, if there is a greater increase in life expectancy for a certain segment of the populace. Companies such as AIG lose money in downturns when claims mount which at times may result in bankruptcy (Lewitt, 183). Recently AIG has sought to garner support among investors and credit ratings companies for a deal that is highly viewed as controversial. This is the sale of securities supported by insurance guidelines of the aging people. However, this has gained few customers as critics refer to these deals as death bonds because they principally pay once the insured person has demised. The giant insurer’s life-settlements portfolio overall sum is $18 billion in anticipated death benefits. This is in regard to the company’s financial filings which has witnessed an approximation of over $45 billion traded since the market started over a decade ago. The AIG activity in a way depicts the company’s entrepreneurial culture as well as exhibiting hoe the company has fallen in last few years as it strived to raise funds to repay the government bailout, thus resulting on it making little profits (Sullivan, 1). Credit Default Swaps (CDS) ...Download file to see next pagesRead More
Comments (0)
Click to create a comment
Risk Management
The risk management practices also aim to maximize the realization of opportunities. The effectiveness in risk management practices determines the performance level of an organization. Similarly, persons at the helm of affairs of risk management team must be capable dealing with any contingency equanimously.
4 Pages(1000 words)Essay
Corporate Culture on the Example of AIG
Introduction Corporate culture shapes up the working practices, behavior and even ethical conduct of the employees within an organization. However, when this culture gets plagued by defective policies, faulty leadership and subdued organizational objectives, demise of the company is sure.
4 Pages(1000 words)Essay
Marketing Financial Services
With time, the complexities of trade and business have been multiplied. Globalization and technological advancements are two major factors that have encouraged the international trade activities and it has also expanded the scope of trade and business. The leading world economies gradually understood the importance of international trade for bringing growth and development.
10 Pages(2500 words)Essay
Credit risk management of CDSs, case from AIG
Exactly one year later, its stock price had fallen by 94% to $3.75. At the onset, United States federal officials and additional regulators attempted to access the capital markets to alleviate the liquidity crisis. Afterward, the Federal Reserve Bank’s Board of Governors declared a bailout plan to rescue AIG from a looming collapse because it feared that AIG’s collapse would be a threat to the overall state of the economy.
18 Pages(4500 words)Essay
AIG Bailout and AIG Bailout Exit Plan
-- one of the world's biggest insurers -- in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system.” (Krnitschnig, 2008) If the bailed was denied, the repercussions would have been much higher and larger than what was caused by the fall of Lehman Brothers.
2 Pages(500 words)Essay
American International Group (AIG)
The paper will seek to answer the question: What could AIG have done differently to prevent its failure and subsequent bailout? Who is responsible for establishing Corporate Culture, as well as inculcating throughout the corporation? Do you think additional regulations would have made a difference for AIG or the Financial Industry as a whole - why?
3 Pages(750 words)Research Paper
Subprime Recent Events
Out of these financial institutions, Lehman brothers went bankrupt and Fannie Mae & Freddie Mac were seized. The only fortunate institution among the ones listed above was AIG which was lucky enough to be bailed out by the U.S. Federal Reserve. All these recent happenings can be related to what is known as "The Big Bank Theory" of finance and economics (PinoyMoney.com, 2008).
4 Pages(1000 words)Essay
International Financial Reporting Standards
This Essay provides an adequate knowledge of International Accounting Standard (IAS) and General Accepted Accounting Principle (GAAP) and their comparison. Mainly we only emphasize on the 5 IAS and compare their similarities and differences with the GAAP.
8 Pages(2000 words)Essay
Ethics in Financial Management
For example a CEO can use ethical guidelines to determine if an expansion plan into a foreign country that is currently at war is appropriate. Accountants utilize ethics in their daily work to ensure
2 Pages(500 words)Essay
AIG accounting scandal (2005) - Income Statement report
The irony behind the occurrence of these scandals is sometimes not taken seriously. What really happened sometimes remain a mystery and the investors and shareholders are left in confusion. In most of
5 Pages(1250 words)Essay
Let us find you another Essay on topic American International Group (AIG) for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us