American International Group Inc. said it is reviewing its operations and discussing possible options with outside parties to improve its business after a week when its stock dropped 45 percent amid concerns about the company's financial underpinnings. “A lot of meetings (are) going on. We're looking at a lot of options. We're talking with a lot of parties,” said spokesman Nicholas Ashooh, declining to comment further Sunday. New York Insurance Superintendent Eric Dinallo and a representative of the state's governor's office have spent the weekend at AIG's offices working with the company and others to craft a solution that protects policyholders, said Dinallo's spokesman David Neustadt in an e-mail. AIG's chief executive, Robert Willumstad, who took the reins on the world's largest insurer in June, may announce a turnaround plan Monday, possibly involving the disposal of major assets including its domestic automotive business and its annuities unit, the Wall Street Journal reported, citing unidentified people. Also possibly up for sale is the company's aircraft-leasing business. The Journal and The New York Times both reported early Monday on their Web sites that AIG is seeking an additional $40 billion in emergency funds - possibly from the Federal Reserve - to help the insurer avoid credit rating downgrade, which would make it more expensive for AIG to raise money. The insurer has already raised $20 billion in fresh capital this year. The need for action was likely exacerbated by the plunge in AIG's stock, which tumbled more than 30 percent on Friday alone. Standard and amp; Poor's warned that it could cut AIG's credit rating by one to three notches because of concerns that AIG will have difficulty accessing capital in the short term. Willumstad has indicated he was willing to shed some assets, saying about a month ago that a “less complex AIG would be a better competitor.” “We're assessing all of our businesses and looking at options for how AIG ought to compete in the future, what kind of businesses we ought to be in,” Ashooh said Sunday night. AIG operates a range of insurance and financial services businesses ranging from property, casualty, auto and life insurance to annuity and investment services. New York-based AIG turned down a capital infusion from a group of private-equity firms because it would have effectively given them control of the company, the Journal said. The developments come as investment bank Lehman Brothers Holdings Inc. declared bankruptcy early Monday, followed by news that Bank of American Corp. was buying Merrill Lynch and & Co. in an all-stock deal worth about $50 billion. Also, US and foreign banks were joining forces to create a plan aimed at restoring confidence in the banking system, which has been weakening over the past year after a sharp rise in mortgage defaults set off deterioration in the broader credit markets. Like other insurers, AIG has been hit hard by deterioration in the credit markets amid concerns that complex, structured investments it insures will increasingly default. For the three quarters ended in June, AIG lost about $25 billion in the value of credit default swaps - or default protection for bondholders - and about $15 billion on other investments, such as mortgage-backed securities, which are bonds backed by a pool of mortgages. Those losses over the past year have come amid a sharp increase in defaults among mortgages. As mortgages have increasingly defaulted, investors have worried bonds backed by the troubled loans would also default, driving their prices down. That has forced companies like AIG to slash their value to comply with accounting standards.
