The acronym AIG stands for American International Group. It is an insurance corporation located in America with its corporate head quarters in the New York City.
AIG was established in 1919 by Cornelius Vander Starr in Shanghai China. Starr was the first Westerner to sell insurance to Chinese which he continued until he relocated AIG to New York City in the United States. As the years rolled on, AIG expanded through subsidiaries located in other markets in other countries in the world. AIG charged insurance according to its potential return whether it suffered decreased sales of certain products for great lengths of time with very little additional expense using brokers. Starr named Greenberg his heir in 1968 and the company went public in 1969. At the turn of the year 2005 AIG became entangled in a series of fraud investigations. Greenberg was expelled amid an accounting scandal in February 2005 today he is still fighting civil charges being pursued by New York State.
The investigation conducted by the New York Attorney General led to a $1.6 billion fine for AIG as well as criminal charges for some of its executives. Martin J. Sullivan who had started at AIG as a clerk in the company’s London office succeeded Greenberg as CEO in 1970. After disclosure of financial losses and subsequent to a falling stock price Sullivan resigned On June 15, 2008.He was replaced by Robert B. Willumstad, who had been a chairman of the AIG Board of Directors since 2006. The US government forced Willumstad to tender his resignation; he was replaced by Edward M. Liddy on September 17, 2008.
In September 2008 AIG’s experienced a liquidity catastrophe when its credit ratings fell below “AA levels. The Federal Reserve Bank of the United States created a credit facility of $85 billion to enable the company to meet its collateral obligations which had increased as a result of the down grade. It came at a cost as in exchange AIG would issue a stock warrant to the Federal Reserve Bank for 79.9% of AIG’s equity. This occurred in September 2008. By May 2009 the Federal Reserve Bank and the United States treasury had augmented the impending financial maintenance to AIG. An investment support of $70 billion dollars, a credit line of $60 billion and $52.5 billion to purchase mortgage-based assets owned and guaranteed by AIG brought the total amount available to $182.5 billion.
Subsequently, AIG sold most of its subsidiaries and other assets to compensate on loans obtained. It is still seeking buyers of its assets. AIG suffered public outrage in March 2009 as well as political and media criticism for its retention expenses of $165 million. Many AIG employees suffered a lot of death threats and hate mail.