WASHINGTON, May 13, 2009 (A. M. Best via COMTEX) -- AIG | Quote | Chart | News | PowerRating -- American International Group Inc. has made substantial progress in righting itself, but "rampant, unwarranted criticism" could hinder its long road to recovery, the company's leader testified before the U.S. House Committee on Oversight and Government Reform.

 

Chairman and Chief Executive Officer Edward Liddy said AIG (NYSE: AIG | Quote | Chart | News | PowerRating) is making progress toward restructuring in four areas: reducing AIG's systemic risk to the global financial system; selling assets and businesses; stabilizing liquidity to forestall further government rescue funds when possible; and restructuring some business units for public offerings, future sales or to be wound down.

In his opening remarks, Committee Chairman Edolphus Towns, D-N.Y., criticized what he said was AIG's continued secrecy on issues from bonuses paid to top executives to its long-term future plans. "In fact, the one thing that stands out the most about the collapse and federal rescue of AIG is the shroud of secrecy that has blanketed the entire sequence of events," he said.

Liddy emphasized his regard for the Federal Reserve, the U.S. Treasury and Congress as "partners" in AIG's restructuring. However, criticism of the company from these same quarters is harmful to that partnership and the company's future success, he said.

"When the employees of AIG make mistakes, we expect to be criticized," Liddy said. "But rampant, unwarranted criticism of AIG serves only to diminish the value of our businesses around the world -- to the detriment of our shareholders, including taxpayers, who own some 80% of AIG."

The AIG federal rescue program has grown to up to $182.5 billion in loans and other assistance since September 2008, when the company nearly fell into bankruptcy because of collateral payments tied to credit default swap contracts.

AIG reported first-quarter earnings on May 7 ? a net loss of $4.35 billion, a little over half the loss it reported for the same period a year ago and a fraction of the $61.66 billion loss it posted for the last quarter of 2008.

The company is restructuring itself and selling assets to repay the federal aid. AIG recently announced a $1.2 billion deal to sell its Tokyo headquarters building (BestWire, May 11, 2009). It also announced plans to close 150 offices for its American General Financial Services subsidiary and eliminate 500 jobs (BestWire, May 12, 2009). AIG Financial Products Corp. completed the sale of its commodity index business, including AIG?s rights to the DJ-AIG Commodity Index, to the equities business of UBS Investment Bank for $15 million, plus payments of up to $135 million over the following 18 months based on future earnings of the purchased business (BestWire, May 7, 2009).

Treasury deducted the money AIG paid in controversial retention bonuses in March from $30 billion in additional federal assistance designated for AIG (BestWire, April 20, 2009). Treasury deducted the $165 million in payments made to employees of AIG Financial Products from the agreement to add up to $30 billion to the federal rescue plan, bringing the total up to $182.5 billion in loans and other aid, AIG said in filings with the U.S. Securities and Exchange Commission.

Most AIG insurance companies currently have a Best?s Financial Strength Rating of A (Excellent) with a negative outlook.

Shares of AIG were $1.63 in morning trading on May 13, down 9.94% from the previous close.

(By Sean P. Carr, senior associate editor, BestWeek: Sean.Carr@ambest.com)