The Economist on the New and Improved AIG - the Most-Bought Stock of Hedge Funds
That AIG is around at all is remarkable. By piling into what would emerge as the most rotten part of the financial system (insuring investors against losses on securities linked to American subprime mortgages) during the credit bubble, it ended up owing billions of dollars to those holding the other side of its bets. Ben Bernanke, the Federal Reserve’s chairman, famously derided AIG as a hedge-fund attached to a large and stable insurance company.
Today’s AIG is different. The buccaneering financial-products unit, whose need for collateral caused the government to intervene in September 2008, is all but shuttered. Many of AIG’s prized units have been sold to help finance its rescue, notably Alico and AIA, both non-US life-insurance businesses with bright prospects. An aircraft-leasing arm is in the process of being flogged.
The transition back to private ownership has been pretty smooth. Much of the credit for the transformation falls to Bob Benmosche, a former boss of MetLife, an insurance rival, who was pulled out of a retirement spent cultivating grapes in Croatia to take the reins in August 2009. Known for his blunt, speak-your-mind approach (a month into the job, he said he was avoiding “those crazies down in Washington”), he has helped turn a demoralised group with a radioactive brand into a company with a renewed sense of self.
The happy ending to this corporate fairy tale is still some years away, however. What remains of AIG is hardly a world-beating company. Return on equity, at 5%, is just about the lowest of its American peers. Margins are lousy at both the general-insurance division (known as property-casualty, which insures homes, cars and the like) and the life-insurance bit (which offers bank-like savings products).
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