Search For Yield

  • 81. AIG also chased higher yields by investing heavily in bonds of lengthy maturity
    • As a consequence, MG grossly mismatched the maturity dates of the collateral investments and the underlying securities loans, which rarely had terms exceeding thirty days.
    • A June 27, 2008 Bloomberg article reported that, state officials said AlG invested more than half the collateral in debt securities that on average would pay off in three to ten years. Because AIG loaned bonds for periods ranging from overnight to 60 days, the insurance units could be exposed to a cash crunch if borrowers suddenly returned securities and demanded their collateral back.  "We were surprised at the length of the paper,' said Joseph Fritsch, director of insurance-accounting policy at the New York State Insurance Department in Manhattan."  (p22-23)

2010 0629 - LC - Transatlantic vs AIG - Affirmation of Anthony J. Albanese - 116p