2008 0912 - FCIC - 2008-09-12 Alejandro LaTorre Email to Geithner et al re Update on AIG
We met with senior executives at AIG to discuss both their liquidity and risk exposure situation.
They estimate that they might have to pay out $18.6B across the firm over the course of next week if they were downgraded.
Breakdown of the $18.6B is:
- Failed rolls on ABCP: $4.7B
- Collateral posting on Muni GICs: $6B
- Collateral posting on Structured Lease GICs: $3B
- Collateral posting in derivatives contracts: $5B
As of close of business today, they have $8B in cash at the holding company.
- Outside of the holding co., the insurance subs have about $68B in securities lending liabilities to the 12 largest firms.
- Program is managed by the holding company (AIG Financial Products).
They are also large issuers of annuities and have $11 B of contingent exposure in their domestic retirement services business.
- These are retail but run by large sponsors who could encourage accounts to put back the annuities in exchange for cash if they lose confidence in AIG.
- These sponsors are U.S. banks who have exposure elsewhere.
- This could be on top of the $18b payout above.
- They have similar exposures in Japan but could not quantify the size.