Monday, March 23, 2009

AIG: A Little Bit Dangerous

By Velida Alemic

If I had to pick one of the most talked about topics in the last few weeks it would have to be AIG. Whether I’m in class, walking the halls of Whitman, watching television or even at work, all I hear is “AIG”! The reason people are talking about the insurance company, American International Group, is because it is an important factor in the financial crisis we are in today.

In order to prevent AIG’s collapse, the United States government gave the company $173 billion in bailout loans and cash. Little did the government know that $165 million of that money would be handed out to executives who helped create the disaster in the first place. Knowing that the American community would be upset about this, the government wants to impose a 90% tax on bonuses paid by AIG to other companies who were bailed out by taxpayer money.

There were talks that AIG is asking for some of those bonuses back, even if the bonuses were given back or the 90% tax rate was imposed on that money, one thing is for sure, the AIG brand is tarnished forever. Insurance companies trade on their image of strength and stability more than anything else, and clearly AIG would not be considered a good candidate for either of the characteristics.

AIG reported that they took in 22% less in premiums in the last three months of 2008 than in did in the last three months of 2007. Also, it’s ability to retain existing customers is not as strong it was in 2008. Greg Theis, a financial planner with Legacy Investment Services in Homer Glen, Illinois said that doing business with AIG is “a liability”, “ a little bit dangerous”. Financial planners don’t want to have to sit there and basically defend AIG to their customers, they want their customers to be confident in who they are doing business with and at this point, that just isn’t AIG.

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