Will AIG Insurances go to bangkruptcy?

AIG or American International Group, is the giant world insurance company based in New York City US. On 16 September 2008, The AIG will file for bankruptcy possibly today or tomorrow. What could keep it from filing is a $75 billion raise in capital from the remaining investment banks. But thanks to a $14 billion margin call on its Credit Default Swaps (CDSs) resulting from S&P's downgrade of its credit rating, this capital raise is unlikely to happen.

Company executives were huddled with advisers last night planning a rescue deal, following a threat on Friday by Standard & Poor's, the credit rating agency, to downgrade the company's debt. AIG shares collapsed by 31 per cent in the hours after that threat was made, and Robert Willumstad, recently installed as chief executive, made plans to bring forward a review of the business that was previously scheduled for 25 September.

The emergency restructuring plan, which AIG was aiming to announce before the start of trading this morning, is likely to include the disposal of major assets including its aircraft leasing business, International Lease Finance Corp. It is also believed to be considering disposals of assets related to its property and casualty insurance businesses.

In the continuing meltdown in the US financial market, World's largest insurer, American International Group (AIG) was today downgraded by credit rating agencies and was racing against time to find a multi-billion dollar infusion to stay afloat.

If AIG declares bankruptcy and they decide to sell off American General, their life insurance subsidiary, there will be a line of companies ready to buy that block of business. If that happens, you will be notified and your next annual payment will be made to a different life insurance company. By law all of the guarantees such as death benefit, term length and rates have to remain the same, so your coverage will be uninterrupted and unchanged.

While this weeks news has been upsetting and volatile, insurance companies are purchased by other insurance companies all the time. A few examples recently would be Chase being purchased by Protective Life and Traveler's Life being purchased by Met Life.