AIG - Solvency

  • "Conditionally Solvent"

  • (p16) - Mr. Cohen* stated that based on discussions with AIG Management, the Corporation is currently insolvent because It is unable to pay its debts as they become due.

    • *Mr. Cohen - H. Rodgin Cohen - Sullivan & Cromwell LLP outside counsel to AIG

2008 0916 - AIG Board of Directors Minutes - 24p 

  • (p46) - John F. TIERNEY (D-MA) - Let me follow up on that, Mr. Dinallo.
    • The State-regulated insurance subsidiaries remain solvent and able to that pay their claims, correct?
  • Eric DINALLO, New York State Superintendent of Insurance - Yes, sir.

 GOV (House-OGR) - The Causes and Effects of the AIG Bailout- AIG Bailout Oversight Hearing, Henry Waxman (D-CA)  ---  [BonkNote]

  • And, with AIG—and you go about the causes—the Federal Reserve—Mr. Bernanke came to us in September of 2008 and said, ‘‘I have just given $85 billion to AIG.’’
    • We have changed the law.
    • He couldn’t do that again because they weren’t solvent.
    • And, therefore, he could not have done that under our current bill.

--  Barney Frank (D-MA)

2014 0723 - GOV (House-CFS) - Assessing the Impact of the Dodd–Frank Act Four Years Later - [PDF-169p, Video-CSPAN]

  • New York Insurance Commissioner Eric Dinallo and Pennsylvania Insurance Commissioner Joel Ario came before your committee and swore state regulation actually worked, and that, whatever its trading losses in London and New York, AIG's insurance companies weren't stripped, they're still solvent.
    • "The 10-K disagrees with them. It's not that hard. They're all crooks."
    • He meant the AIG people, not the insurance commissioners.

2009 0327 - The Philadelphia Inquirer - Congressman wants AIG leaders jailed, Rep. Grayson, Alan Grayson (D-FL) - [link]

  • Damon Silvers - 2010 0526 - COP - Hearing - TARP and Other Government Assistance for AIG - [PDF-241p,
    • (p218) - Mr. SILVERS. Is it not the case that in the week of September 15, 2008, that the cash calls that the company could not meet were in two lines of business and two lines of business only.
      • And but for those cash calls, none of this would have been necessary?
      • And those two lines of business were, and it depends on what— you know you can believe or not—you can argue I guess with the state insurance regulators, they certainly were the swaps business and they may have been the securities lending business.
      •   And but for those two enterprises, none of this would have occurred?
        • Is that not so?
    • Mr. MILLSTEIN. That is not so. So let me——
    • Mr. SILVERS. Are you seriously asserting that if you wipe those two pieces of business off the books, that AIG was nonetheless insolvent?
    • Mr. MILLSTEIN. Let me——
    • Mr. SILVERS. And are you accusing the New York State Insurance Commissioner of lying to this panel?
  • Jim Millstein, Chief Restructuring Officer, U.S. Department of the Treasury
  • Mark MCWATTERS, COP Member - Okay. Mr. Alvarez, Mr. Baxter, in the view of the Federal Reserve Bank, in the view of the Federal Reserve Bank of New York, is AIG today a solvent entity?
  • Scott ALVAREZ, FRB - General Counsel, Federal Reserve Board.  - So AIG does not have negative net worth. It has a positive cash capital. It is meeting the demand for loans as they come due.
  • Mark MCWATTERS, COP Member - Okay.
  • Scott ALVAREZ, FRB. So it does meet the traditional definition of solvency. It is repaying the Federal Reserve from the liquidation of assets in the Maiden Lane II and III facilities and also from the sale of its companies to repay the revolving line of credit. (p90)

2010 0526 - COP - Hearing - TARP and Other Government Assistance for AIG, Congressional Oversight Panel  ---  [BonkNote]

  • (p10) - Mr. DINALLO - (New York State Superintendent of Insurance): The most immediate problem that got our attention was the pending downgrade of the company.
    • So one of the rating agencies had threatened on I think it was September, I don’t know, 9th or so to downgrade the company.
    • That’s when I received a call from the general counsel and the former CFO asking if we would be able to help provide certain liquidity through the insurance subsidiaries, which were very solvent and well capitalized.
  • (p46) - John F. TIERNEY (D-MA) - Let me followup on that, Mr. Dinallo.
    • You noted in your written statement that AIG is a holding company and owns a variety of insurance and other businesses.
    • And Massachusetts’ insurance commission was quick to share with me the fact that the problems at AIG are really those that deal not with its insurance subsidiaries but with its operations and holding company, those in the Financial Products Division, securities lending division and that area there.
    • The State-regulated insurance subsidiaries remain solvent and able to that pay their claims, correct?
  • Mr. DINALLO - (New York State Superintendent of Insurance) -  Yes, sir.
  • GOV (House) - The Causes and Effects of the AIG Bailout - AIG Bailout Oversight Hearing, Panel 1 - [PDF-171p,
    • Dinallo Testimony - 8p
    • 2008 1006 - NAIC to GOV Letter - Praeger to Waxman, Davis - [link to NAIC Page - 4p]
      • (p1-2) - The problems stem from the operations of AIG’s holding company, its financial products division, and its securities lending division, regulated at the Federal level by the Office of Thrift Supervision (OTS).
  • 2021 0225 - YPFS Lessons Learned Oral History Project: An Interview with Eric Dinallo - 19p
    • Dinallo:  I decided that I had enough information, and enough belief in the statutory accounting, which we can talk about. Which is really part of the story. That I was going to go out there and make statements about my confidence in the insurance companies of AIG.
      • Because I did believe that on a statutory accounting basis, they had more than enough assets to match their long-term liabilities on a statutory accounting basis. Not mark to market. Which Geithner to this day …
    • YPFS: Can you talk a little bit more about that?
    • Dinallo: When Geithner heard this, I made this joke. I don't know if I've been quoted.
      • I think he thought I was explaining the Mayan calendar to him. It was so alien and so weird.
      • But basically, life insurance companies have long-term liabilities, and they match it with long-term assets that are going to perform by maturing 20 years from now.
      • That's why so much of the reserves are put towards basically debt, Treasuries, etc., that are highly rated.
        • So that they will almost certainly, hopefully, certainly perform.
        • Which means mature. You're going to get the coupon along the way, albeit a small yield.
        • The volatility before maturation over the 20 years does not count.
      • This is the biggest debate in insurance right now.
        • Between Europe, the feds, and the United States.
          • That the inter-period where there's volatility, and this is what I mean by, back with Shelby.
          • They were like, "Oh my god, they're insolvent."
          • I'm like, "They're not insolvent.
            • They may be, on some reporting basis, marginally insolvent."
  • (p12) - Ben Nelson - Chief Executive Officer of the NAIC, Former Governor of Nebraska from 1991-1999 and Former United States Senator from Nebraska from 2001-2013
    • First of all, I want to thank you for the introduction. I appreciate the courtesy of doing that.
    • The NAIC is very honored to be located in your district.
    • I would say that only perhaps in a misunderstood way is AIG looked at as an insurance company problem, because:
      • the insurers under the holding company were all solvent,
      • were financially regulated by various States,
      • and there weren’t any problems with stability and solvency with the insurance operations,
    • ... but the fact that the holding company became a thrift holding company and was subject to other, to jurisdictional regulation at the Federal level, which would have been, I suppose, what they call group or consolidated supervision,
      • but the insurers themselves were all solvent because they were regulated by the States

2013 0613 - GOV (House) - The Impact of International Regulatory Standards on the Competitiveness on US Insurers - [PDF-164p.

  • (p43) - Melissa BEAN (D-IL).  I guess my question is, is it your opinion from what you have testified to thus far that the insurance subsidiaries of AIG are solvent, and if that is the case, why has the latest round of Federal dollars gone to the life insurance side of the business?
  • Terri VAUGHAN (NAIC CEO) -  The insurance companies are solvent.
    • The insurance companies before they got the round of Federal funds had positive capital and surplus.
    • There was a question about at what level did you want that risk based capital to be, and I think that was a determination that was made outside of the insurance regulatory system.
    • We were fine.
    • Had AIG not gotten that money, no policyholders would have lost money, is my understanding.
  • Ms. BEAN. You are saying the latest round of Federal monies going to the insurance companies is not necessary?
  • Ms. VAUGHAN. What I am saying is it is increasing their risk based capital ratios.
    • It is not taking an insolvent company and making it solvent.
  • Ms. BEAN. The $30 billion additionally is necessary for the insurance companies?
  • Ms. VAUGHAN. What I am saying—I will try again. Sorry.
    • The AIG insurance company is solvent.
    • They got additional capital through this latest round but it did not take an insolvent company and make it solvent.
      • It took a solvent company and made it more solvent.  (p43)

2009 0305 - GOV (House) - Perspectives on Systemic Risk - [PDF-254p

  • Clip - Bean/ Vaughan - Solvency, did AIG need the money?