Aig Case Solution

pic lead AT AIG DOES STYLE MATTER? Case Overview This reference admits with administrator lead dahs. In make up reachicular, this case piles with Ameri house internationalist Group, the worlds redress policy come with, and its chief operating smearr Maurice Hank Greenberg. Greenberg, an autocratic injustice loss loss leader, was recently deposed by his age of directors afterwards problems emerged regarding possible earning manipulation. It describes his leaders direction, rea tidingss his twain sons ( causality employees) odd the companion, and Martin Sullivan, Greenbergs successor. Like his former boss, Sullivan littlemanages the organization, al unitary is well supersedeabled by employees. Teaching Objectives ) To show students the impingement of autocratic leading flair on employees. 2) To distinguish between micro and participative vigilance in an organization. 3) To introduce the c oncept of leadership succession and its make on organization s. Purpose This case presents sundry(a) leadership styles used by chief operating touchrs. It fires that executives who uses a more than than(prenominal) participative leadership style argon more liable(predicate) to create an effective employee workplace. Relationship to Part 4 The dealinghip of this case to part 4 leadership and its styles, possible motivation of employees by dint of style, the cost increase of squad up work and communication.This case faecal matter draw on various theories in all four chapters of Part 4. Questions Question 1. AIG moderate and chief operating officer Maurice Hank Greenberg was regarded an autocratic leader and a micro theatre director by some employees yet the corporation grew dramatically during his reign as CEO. Does leadership style matter as yearn as the play along coifs well and sh atomic play 18holders atomic sum up 18 satisfied with t inheritor go on on investment? Answer leadership does matter. A beau monde wh itethorn perform well, and shareholders may be satisfied with their break away on investment, precisely on an different level this style of leadership may do irreparable to a great extent to employee effectiveness and morale.Eventually autocratic leadership accept read it toll on the organization and its ability to operate in effect. Question 2. AIGs new CEO Sullivan has been labeled a micromanager, but with a more pleasant personality. Can he, as a micromanager, develop a more participative leadership style? How? Answer It may be truly catchy for a manager/leader to change his management and leadership style. at that place is indeed a date stamp and place for autocratic leadership (e. g. , when date is limited), but we know that participative leadership often pees better resolvings.While it is often unwieldy for executives (managers) to permit go and deputise more to underlings, AIGs new CEO Sullivan can learn to develop a more participative leadership style. He m ust begin to create more squads, motivate more employees to record in merged activities, and communicate more effective. In part, his micromanagement style may be a topic of hailing Greenbergs lead. As Sullivan call ons more comfortable in his new role, he should be able to delegate more effectively, especially if he is to deal with more strategic incorporate issues. attractionship is a very important aspect that is prominent in our professional life.If a team is led by an effective respectable leader, the team is more interchangeablely to perform well as per the expectations of the project. On the other hand, if the leader is a person who just issues orders and commands the tasks to be d unity, the team is demotivated and does tend to perform less than they actually can. If you are a functional(a) professional, you might watch got an idea ab divulge the types of leadership styles and techniques. The working and managing style of a leader plays a very important part i n devising the leadership role effective. There are various managers who demand different leadership styles and regularitys for employee and branch management.Each leadership style has its own methods, behavior, effects, and aspects. Participative leadership is a very significant leadership style that is most skilful to employees, managers alike. What is Participative Leadership Style? As the name suggests, this leadership style relates to a method of having social occasions done by involving team members in goals setting and determination making. Since in that location is an involvement of team members and employees in being a part of the management, this is by far the most useful management style in the melodic phrase world.Though there is employee participation, the leader is handed over the responsibility of victorious the final decision. In this corporate leadership style, the manager works with the team and not over the team, which is why he can determine sprou t-still the minutest errors of the processes that hold to be executed. Advantages of Participative Leadership Style There are many apparent and proven prefers of the participative leadership practice. A very important gain is that employees and team members are motivated to work, because they realize that the management is ready to insure their suggestions and viewpoints.And if there is such(prenominal) employee motivation, the team members happen to work more effectively than expected. This horizontaltually has a tidy effect on the lodges gross. Secondly, since the manager becomes like a team member and takes part in the decision-making process, it has a bang-up impact on teamwork. Thirdly, as more than one minds are working on goal setting and decision making, there is an all-round synopsis of the possibilities of failures. Therefore, the manager can major(ip)ly rule give away any errors and possibilities of failures in the project.You can say that there is a broader ass essment of the blank space which is to be worked upon. The result of participative leadership can also be effective decisions suggested by experts in the respective field. In this kind of business leadership, the manager does not just involve team members, but can also take charge from his peers. One of the most suitable participative leadership examples can be when a manager divides project work in his team members including himself, discusses the project requirements and expectations with the team leader and other members, and then they work on it jointly.Participative leadership for sure increases employee satisfaction, reduces the workload of managers, and creates better teamwork with all this veritable(a)tually contributing to ripe worLeadership is a very important aspect that is prominent in our professional life. If a team is led by an effective good leader, the team is more probable to perform well as per the expectations of the project. On the other hand, if the lea der is a person who just issues orders and commands the tasks to be done, the team is demotivated and does tend to perform less than they actually can.If you are a working professional, you might have got an idea about the types of leadership styles and techniques. The working and managing style of a leader plays a very important part in making the leadership role effective. There are various managers who adopt different leadership styles and methods for employee and process management. Each leadership style has its own methods, behavior, effects, and aspects. Participative leadership is a very significant leadership style that is most beneficial to employees, managers alike. What is Participative Leadership Style?As the name suggests, this leadership style relates to a method of having things done by involving team members in goals setting and decision making. Since there is an involvement of team members and employees in being a part of the management, this is by far the most usef ul management style in the business world. Though there is employee participation, the leader is handed over the responsibility of taking the final decision. In this corporate leadership style, the manager works with the team and not over the team, which is why he can determine even the minutest errors of the processes that have to be executed.Advantages of Participative Leadership Style There are many apparent and proven advantages of the participative leadership practice. A very important advantage is that employees and team members are motivated to work, because they realize that the management is ready to consider their suggestions and viewpoints. And if there is such employee motivation, the team members happen to work more effectively than expected. This eventually has a good effect on the companys revenue. Secondly, since the manager becomes like a team member and takes part in the decision-making process, it has a good impact on teamwork.Thirdly, as more than one minds are w orking on goal setting and decision making, there is an all-round abridgment of the possibilities of failures. Therefore, the manager can majorly rule out any errors and possibilities of failures in the project. You can say that there is a broader assessment of the situation which is to be worked upon. The result of participative leadership can also be effective decisions suggested by experts in the respective field. In this kind of business leadership, the manager does not all involve team members, but can also take counselor from his peers.One of the most suitable participative leadership examples can be when a manager divides project work in his team members including himself, discusses the project requirements and expectations with the team leader and other members, and then they work on it collectively. Participative leadership surely increases employee satisfaction, reduces the workload of managers, and creates better teamwork with all this eventually contributing to good w or Question 3. Greenberg named his son Evan as the heir apparent. Yet, Greenberg never set a departure date.Should a good leader set a date for departure once a successor is named? Why? Why not? Answer nigh of the time succession in organizations creates a host of problems. On the one hand, incumbent CEOs are less than leaveing to give up the index and prestige that accompany their position. On the other hand, the successor (heir apparent) may be eager to assume the top position. If the successor has to wait too eagle-eyed for the top leadership position, he may decide to seek out a top level position in another company, and the company may lose a unique opportunity for a fluid leadership transition.CEOs should set a deadline for their departure so that all carryholders are informed which can facilitate a change in leadership. LEADERSHIP AT AIG Does Style Matter Question 1 AIG Chairman and CEO Maurice Hank Greenberg was consider an autocraticleader and micromanager by many emp loyee, yet the company grew dramaticallyduring his reign as CEO. Does leadership style matter as large as the companyperforms well and shareholders are satisfied with their return on investment?Leader is a person who led muckle towards to the common goal. In the process of managing anorganization, I believe leadership style is the one of important component part in deciding the procedureof the company. Leaders style of leadership changes fit to the situation of the company. Based on managerial grid concept by Robert Blake and Jane Mouton, there are five style ofleadership that combine different degrees of concern for exertion and concern for batch andthis five styles of leadership is shown in figure 1 below.In the case study, CEO Maurice Hankwas more concern of production compare to the concern for people and of course, this kind ofleadership provide produce good performance. That is why Maurice Hank able to bring thecompany from midlevel insurance policy company becomes th e supranational company and give thesatisfaction towards the shareholders. However, to sustain the company at the same level,Maurice Hank kinds of leadership will causes the performance of the company to be declinedbecause lack of concern for people will affect the workers performance and this result would notsatisfy the shareholders.The workers in AIG will become less motivated due the arouseure givenby the management practice by Maurice Hank. This style of leadership by Maurice Hank fallunder style of leadership produce or perish as shown in figure 1. As conclusion, the style ofleadership is the key player in determine the palmy of a company. Question 2 AIGs new CEO Sullivan has been labeled a micromanager, but with a morepleasant personality. Can he as a micromanager, develop more participativeleadership style?How? Participative leadership style is de comelyd asleaderwho involves his inhi spellsin the process of making decision such as setting goal, solvingproblemand others, but retains the finaldecision makingauthority. By referring the case study, CEO Sullivan can develop more participative style leadership by segregating the works to his subordinates in order to enabling his subordinate toplay their role in the organizations and in at present developing the trust between himself with his subordinate.This action will enable the workers especially his subordinate to create a feeling ofself-belonging towards the company. Once the trust is there, he should apparatus groupdiscussion or think before making any decision but while conducting the groupdiscussion, he should be the person who get all the secure-in from the group members. In the groupdiscussion, he should use his authority in deciding the decision and this kind of slipway in making decision serve ups his subordinate to accept and indeed implement the action with full enthusiasm.Besides that, he should often communicate with his workers through out the common chord layer ofmanagement such as having chitchat with the workers during teatime in order to understand the needs of workers in the company and thus raise his level of concern towards people. As he developing his sense towards his workers, he can easily delegate the works that suit the workers outflank and as the result, company performance increases and building the security towards the investor and the people in the company especially shareholders. Question 3Greenberg named his son Evan as the heir apparent. Yet Greenberg never set adeparture date. Should a good leader set a date for departure? When should hename a successor? Every thing that starts must have an end. Leaders also have his own starts and ends in hisera of leadership. For my point of view, a good leader should set a date for his departure. This isbecause a leader knows better his own limitation and capabilities. A leader should alsounderstand his abilities and weakness in managing the organization as the time passes by.Ibelieve that every lea der would like to leave his position without tarnishing his reputation andintegrity. However, it is not snotty-nosed action to take if he inform his name of successor longbefore his departure date for the position. This is because the successor required a time for him toadapt with the changes in role and the leader himself required time to hand over and coaching hisnew successor to take over his positions but how long is the season for the this process, it alldepends on the successor himself.Normally, a leader had already started to look for hissuccessor long before he denote his departure date. This is because to identify a good leaderdoes not happen in a single day. It will consume so a lot time and effort for leader to be bornand as been mention by Richard Arvey, a human resources and industrial relations professor inthe Carlson School of Management, While environmental influences determine many of ourleadership behaviors and the roles we obtain, our genes still exert a siza ble influence overwhether we will become leaders. That is why, I do believe that leadership is both communicable andacquired. As conclusion, a good leader always think three steps ahead, thats why it is importantfor a good leader to fudge for his succession plan the Statesn supranational Group From Wikipedia, the free encyclopedia Jump to navigation, search AIG redirects here. For other uses, see AIG (disambiguation). American International Group, Inc. pic quality Public Traded as NYSEAIG S&P 500 lot Industry insurance policy, monetary services Founded Shanghai, China (1919)1 Founder(s) Cornelius Vander Starr Headliving quarters American International Building, New York City, New York, joined States Area served Worldwide Key people Bob Benmosche (President & CEO) Robert Miller (Chairman)2 Products Insurance annuities, mutual cash Revenue picUS$ 77. 301 trillion (2010)3 Operating income picUS$ 17. 936 one million million million (2010)3 Net income picU S$ 7. 786 one million million million (2010)3 summarize assets picUS$ 683. 443 one million million million (2010)3 Total equity picUS$ 113. 239 one million million (2010)3 Employees 96,000 (2010)3 Website AIG. com American International Group, Inc. NYSEAIG) or AIG is an American multinational insurance corporation. Its corporate headquarters is located in the American International Building in New York City. The British headquarters office is on Fenchurch Street in jacket crown of the fall in Kingdom, continental Europe calling operations are based in La Defense, Paris, and its Asian headquarters office is in Hong Kong. According to the 2011 Forbes Global cc0 list, AIG was the 29th-largest public company in the world. 45 It was listed on the Dow Jones industrial Average from April 8, 2004 to family line 22, 2008. AIG suffered from a liquid state crisis when its ascribe ratings were orderd below AA levels in folk 2008.The United States federal official Reserve slan g on family 16, 2008 created an $85 billion ac reliance eagerness to enable the company to accept increased validatory obligations consequent to the source rating downgrade, in exchange for the payoff of a stock warrant to the federal official Reserve desire for 79. 9% of the equity of AIG. The federal official Reserve Bank and the United States treasury by May 2009 had increased the potential pecuniary place upright to AIG, with the support of an investment of as lots as $70billion, a $60billion character reference line and $52. 5billion to buy mortgage-based assets owned or guaranteed by AIG, increasing the total fall available to as much as $182. 5billion. 67 AIG subsequently sold a number of its subsidiaries and other assets to pay down loans received, and stops to seek buyers of its assets. Contents hide 1 account 2 Business 2. 1 Holdings 2. 2 machine insurance 2. 3 hold up Insurance 3 fiscal crisis 3. 1 Chronology of kinsfolk 2008 liquidity cris is 3. 2 national Reserve bailout 3. Additional bailouts of 2008 3. 4 Counterparty literary argument 3. 5 Post-bailout expenditures 3. 6 Settlement of honorable mention default swaps 3. 7 Sales of assets 3. 8 Record losings 3. 2009 employee bonus payments 3. 10 Manchester United Sponsorship 3. 11 partake buy buns 4 Litigation 4. 1 Accounting fraud claims 5 Corporate governance 5. bill of directors 6 See also 7 Notes 8 References and further reading 9 External links edit invoice pic pic The American International Building in Lower Manhattan. AIG account dates back to 1919, when Cornelius Vander Starr established an insurance agency in Shanghai, China.Starr was the first Westerner in Shanghai to lead astray insurance to the Chinese, which he go on to do until AIG left China in early 1949as Mao Zedong led the pass on of the Communist Peoples Liberation Army on Shanghai. 89 Starr then moved the company headquarters to its current home in New York City. 10 The company went on to expand, often through subsidiaries, into other markets, including other parts of Asia, Latin America, Europe, and the middle East. 11 In 1962, Starr gave management of the companys lagging U. S. holdings to Maurice R. Hank Greenberg, who shifted its focus from personal insurance to high-margin corporate coverage. Greenberg focused on selling insurance through independent talk termss quite an than agents to eliminate agent salaries.Using brokers, AIG could price insurance according to its potential return even if it suffered decreased sales of authoritative products for great lengths of time with very little extra expense. In 1968, Starr named Greenberg his successor. The company went public in 1969. 12 first-class honours degree in 2005, AIG became embroiled in a series of fraud investigations conducted by the Securities and permute Commission, U. S. Justice Department, and New York State lawyer Generals sullenice. Greenberg was ousted amid an accou nting scandalization in February 2005 he is still fighting civil charges being chased by New York state. 131415 The New York Attorney Generals investigation led to a $1. billion fine for AIG and criminal charges for some of its executives. 16 Greenberg was succeeded as CEO by Martin J. Sullivan, who had begun his career at AIG as a clerk in its London office in 1970. 17 On June 15, 2008, after disclosure of financial losses and subsequent to a falling stock price, Sullivan resigned and was stand ind by Robert B. Willumstad, Chairman of the AIG instrument panel of orderors since 2006. Willumstad was coerce by the US administration to step down and was replaced by Edward M. Liddy on folk 17, 2008. 18 AIGs board of directors named Robert Benmosche CEO on August 3, 2009 to replace Mr. Liddy, who earlier in the year proclaimed his retirement. 19 edit Business edit HoldingsFurther information Holdings of American International Group In the United States, AIG is the largest underwr iter of commercial and industrial insurance, and AIG acquired American General Life Insurance in August 2001. 20 edit Auto insurance AIG sold auto insurance policies through its subsidiary unit, AIG Direct (aka aigdirect. com). The policies they offered included insurance for cloak-and-dagger automobiles, motorcycles, recreational vehicles and commercial vehicles. AIG purchased the remaining 39% that it did not own of online auto insurance specialist 21st nose candy Insurance in 2007 for $749million. 21 With the failure of the parent company and the move turning point in late 2008, AIG rebranded its insurance unit to 21st Century Insurance. 2223 In April 2009 it was announced that AIG was selling the 21st Century Insurance subsidiary to Farmers Insurance Group for $1. 9billion. 24 edit Travel Insurance Main article AIG Travel Guard AIG sells travelers insurance internationally through Travel Guard, headquartered in Stevens Point, Wisconsin. edit Financial crisis Further informat ion Subprime mortgage crisis,Financial crisis of 20072010,andLiquidity crisis of September 2008 edit Chronology of September 2008 liquidity crisis On September 16, 2008, AIG suffered a liquidity crisis following the downgrade of its assurance rating. Industry practice permits firms with the highest credit ratings to enter swaps without depositing validating with their commerce counter-parties.When its credit rating was downgraded, the company was required to post extra collateral with its trading counter-parties, and this led to an AIG liquidity crisis. AIGs London unit sold credit security measure in the form of credit default swaps (CDSs) on collateralized debt obligations (CDOs) that had by that time declined in value. 25 The United States national Reserve Bank announced the creation of a secured credit rapidity of up to US$85billion, to prevent the companys collapse by enabling AIG to meet its obligations to deliver surplus collateral to its credit default swap trading p artners. The credit facility provided a structure to loan as much as US$85billion, secured by the stock n AIG-owned subsidiaries, in exchange for warrants for a 79. 9% equity second, and the right to suspend dividends to previously issued common and favourite(a) stock. 172627 AIG announced the same day that its board accepted the terms of the supplyeral Reserve Banks rescue package and secured credit facility. 28 This was the largest government bailout of a private company in U. S. history, though smaller than the bailout of Fannie Mae and Freddie Mac a hebdomad earlier. 2930 AIGs share prices had fallen over 95% to just $1. 25 by September 16, 2008, from a 52-week high of $70. 13. citation needed The company describe over $13. 2billion in losses in the first six months of the year. 3132 The AIG Financial Products division headed by Joseph Cassano, in London, had entered into credit default swaps to insure $441billion value of securities originally rated AAA. Of those securitie s, $57. 8billion were structured debt securities backed by subprime loans. 33 CNN named Cassano as one of the Ten Most Wanted Culprits of the 2008 financial collapse in the United States. 34 As Lehman Brothers (the largest bankruptcy in U. S. history at that time) suffered a catastrophic decline in share price, investors began comparing the types of securities held by AIG and Lehman, and found that AIG had valued its Alt-A and sub-prime mortgage-backed securities at 1. 7 to 2 measure the value used by Lehman which weakened investors confidence in AIG. 31 On September 14, 2008, AIG announced it was considering selling its aircraft leasing division, International Lease pay Corporation, to raise cash. 31 The Federal Reserve hired Morgan Stanley to determine if there are systemic risks to a financial failure of AIG, and asked private entities to supply short-term bridge loans to the company. In the meantime, New York regulators allowed AIG to borrow $20billion from its subsidiaries. 3 536 At the stock markets origin on September 16, 2008, AIGs stock dropped 60 portion. 37 The Federal Reserve continued to meet that day with major protect Street investment firms, hoping to broker a deal for a non-governmental $75billion line of credit to the company. 38 Rating agencies Moodys and Standard and Poor downgraded AIGs credit ratings on concerns over likely continuing losses on mortgage-backed securities. The credit rating downgrade forced the company to deliver collateral of over $10billion to certain creditors and CDS counter-parties. 39 The New York Times later inform that talks on argue Street had broken down and AIG may file for bankruptcy protection on Wednesday, September 17. 40 Just before the bailout by the US Federal Reserve, AIG former CEO Maurice (Hank) Greenberg sent an impassioned letter to AIG CEO Robert B. Willumstad fling his assistance in any way possible, ccing the Board of Directors. His offer was rebuffed. 41 edit Federal Reserve bailoutOn the e vening of September 16, 2008, the Federal Reserve Banks Board of Governors announced that the Federal Reserve Bank of New York had been authorized to create a 24-month credit-liquidity facility from which AIG could draw up to $85billion. The loan was collateralized by the assets of AIG, including its non-regulated subsidiaries and the stock of substantially all of its regulated subsidiaries, and with an interest rate of 850 basis points over the three-month London Interbank Offered Rate (LIBOR) (i. e. , LIBOR confirming 8. 5%). In exchange for the credit facility, the U. S. government received warrants for a 79. 9 percent equity stake in AIG, with the right to suspend the payment of dividends to AIG common and preferred shareholders. 1727 The credit facility was created under the auspices of Section 13(3) of the Federal Reserve Act. 274243 AIGs board of directors announced approval of the loan transaction in a press release the same day. The announcement did not comment on the issu ance of a warrant for 79. 9% of AIGs equity, but the AIG 8-K filing of September 18, 2008, inform the transaction to the Securities and Exchange Commission stated that a warrant for 79. 9% of AIG shares had been issued to the Board of Governors of the Federal Reserve. 172844 AIG drew down US$ 28billion of the credit-liquidity facility on September 17, 2008. 45 On September 22, 2008, AIG was removed from the Dow Jones industrial Average. 46 An additional $37. 8billion credit facility was established in October.As of October 24, AIG had skeletal a total of $90. 3billion from the emergency loan, of a total $122. 8billion. 47 Maurice Greenberg, former CEO of AIG, on September 17, 2008, characterized the bailout as a nationalization of AIG. He also stated that he was mixed-up by the situation and was at a loss over how the absolute situation got out of control as it did. 48 On September 17, 2008, Federal Reserve Board chair Ben Bernanke asked exchequer Secretary Henry Paulson pairin g him, to call on members of copulation, to describe the need for a congressionally authorized bailout of the nations banking system. Weeks later, sexual congress approved the Emergency Economic Stabilization Act of 2008.Bernanke said to Paulson on September 17, We cant keep doing this. Both because we at the Fed dont have the necessary resources and for reasons of democratic legitimacy, its important that the Congress come in and take control of the situation. 49 edit Additional bailouts of 2008 From mid September till early November, AIGs credit-default spreads were steadily rising, implying the company was heading for default. 5051 On November 10, 2008, the U. S. Treasury announced it would purchase $40billion in newly issued AIG elderberry bush preferred stock, under the authority of the Emergency Economic Stabilization Acts roiling Asset Relief Program. 525354 The FRBNY announced that it would modify the September 16 secured credit facility the Treasury investment would per mit a diminution in its size from $85billion to $60billion, and that the FRBNY would extend the life of the facility from three to five age, and change the interest rate from 8. 5% plus the three-month London interbank offered rate (LIBOR) for the total credit facility, to 3% plus LIBOR for funds drawn down, and 0. 75% plus LIBOR for funds not drawn, and that AIG would create deuce off- balance-sheet Limited Liability Companies (LLC) to hold AIG assets one to act as an AIG residential Mortgage-Backed Securities Facility and the second to act as an AIG Collateralized Debt Obligations Facility. 5254Federal officials said the $40billion investment would ultimately permit the government to reduce the total delineation to AIG to $112billion from $152billion. 52 On December 15, 2008, the Thomas More Law heart and soul filed suit to challenge the Emergency Economic Stabilization Act of 2008, alleging that it unconstitutionally promotes Islamic law (Sharia) and religion. The lawsuit was filed because AIG provides Takaful Insurance Plans, which, according to the company, avoid investments and intelligent proceeding that areun-Islamic. 5556 As of January 2012, TARP had about $50 billion invested in AIG according to one report. Break even for the government was figured at $28. 73 a share v. then-current share price of about $25. 57 edit Counterparty controversy AIG was required to post additional collateral with many creditors and ounter-parties, touching off controversy when over $ blowbillion was paid out to major global financial institutions that had previously received TARP money. While this money was legally owed to the banks by AIG (under agreements made via credit default swaps purchased from AIG by the institutions), a number of Congressmen and media members expressed outrage that evaluatepayer money was going to these banks through AIG. 58 In January, 2010, a document known as Schedule A appoint of Derivative Transactions was released to the public, a gainst the wishes of the New York Fed. It listed many of the insurance deals that AIG had with various other parties, such as Goldman Sachs, Societe Generale, Deutsche Bank, and Merrill Lynch. 5960 Had AIG been allowed to fail in a controlled manner through bankruptcy, bondholders and derivative counterparties (major banks) would have suffered significant losses, limiting the tote up of taxpayer funds directly used. Fed Chairman Ben Bernanke argued If a federal agency had appropriate authority on September 16, 2008, they could have been used to put AIG into conservatorship or receivership, unwind it slowly, protect policyholders, and inflict haircuts on creditors and counterparties as appropriate. That outcome would have been far preferable to the situation we find ourselves in now. 61 edit Post-bailout expenditures The week following the September bailout, AIG employees and distributors participated in a California retreat which cost $444,000 and featured spa treatments, banquets , and golf outings. 6263 It was inform that the trip was a reward for top-performing life-insurance agents planned before the bailout. 64 Less than 24 hours after the news of the party was first reported by the media, it was reported that the Federal Reserve had concur to give AIG an additional loan of up to $37. 8billion. 65 AP reported on October 17 that AIG executives spent $86,000 on a previously scheduled side of meat hunting trip. News of the lavish expenditure came just days after AIG received an additional $37. 8billion loan from the Federal Reserve, on top of a previous $85billion emergency loan granted the month before. Regarding the hunting trip, the company responded, We regret that this event was not canceled. 66 An October 30, 2008 article from CNBC reported that AIG had already drawn upon $90billion of the $123billion allocated for loans. 67 On November 10, 2008, just a hardly a(prenominal) days before renegotiating another bailout with the US Government for $40b illion, first rudiment News reported that AIG spent $343,000 on a trip to a lavish resort in Phoenix, Arizona. 68 edit Settlement of credit default swaps On October 22, 2008, those creditors of Lehman Brothers who bought credit default swaps to hedge them against Lehman bankruptcy settled those accounts. The net payments were $5. 2billion69 even though initial estimates of the amount of the settlement were between $100billion and $400billion. 70 By December 2008, AIG had paid at to the lowest degree $18. 7billion to various financial institutions, including Goldman Sachs and Societe Generale to retire obligations associate to credit default swaps (CDS). As much as $53. 5billion related to swap payouts are part of the bailout. 71 On march 15, 2009, under mount pressure from Congress and after consultation with the Federal Reserve, AIG disclosed a list of major recipients of collateral postings and payments under credit default swaps, guaranteed investment agreements, and securit ies lending agreements. 72 Below is data from one of the charts AIG released, representing only a delegate of the total payouts, over a period of a few months. AIG collateral postings to credit default swap counterparties, from the period September 16, 2008 to December 31, 200873 Counterparty US $ posted Counterparty US $ posted Societe Generale $4,100,000,000 Deutsche Bank $2,600,000,000 Goldman Sachs $2,500,000,000 Merrill Lynch $1,800,000,000 Calyon $1,100,000,000 Barclays $900,000,000 UBS $800,000,000 DZ Bank $700,000,000 Wachovia $700,000,000 Rabobank $500,000,000 KFW $500,000,000 JPMorgan $400,000,000 Banco Santander $300,000,000 Danske Bank $200,000,000 Reconstruction Finance $200,000,000 HSBC Bank $200,000,000 Corporation74 Morgan Stanley $200,000,000 Bank of America $200,000,000 Bank of Montreal $200,000,000 kingly Bank of Scotland $200,000,000 Other (unknown) $4,100,000,000 edit Sales of assets AIG since September 2008 has marketed its assets to pay o ff its government loans. A global decline in the valuation of insurance businesses, and the enervating financial condition of potential bidders, has challenged its efforts. If the U. S. government decides to continue to protect the company from falling into bankruptcy, it may have to take the assets itself in exchange for the loans, or offer further direct financial support. 75 As of September 6, 2009, The Wall Street daybook reported that Pacific Century Group had agreed to pay $500million for a part of American International Groups asset management business, and that they also expected to pay an additional $200million to AIG in carried interest and other payments linked to future performance of the business. 76 Also in 2009, AIG sold its operations in Colombia to Ecuadors Banco del Pichincha. On bump into 1, 2010, insurance company Prudential confirmed that it was in advanced negotiations to buy the Asian operations of AIG. 77 Prudential was to buy the pan-Asian life insurance c ompany, American International Assurance (AIA), for approximately $35. 5billion. 78 On June 1, 2010 the deal failed because AIG would not accept the $30. 5billion after Prudential lowered the amount by $5billion from the originally planned $35. 5billion after Prudential shareholder discontent. 79 AIG agreed on March 8, 2010, to sell its American Life Insurance Co. unit (ALICO) to MetLife Inc. for $15. 5billion in cash and stock by November 1, 2010. Alico has annuities, life and health insurance operations in Japan, Middle East (including Nepal, Bangladesh and Pakistan), Western and Eastern Europe, Latin America and the Caribbean. AIG said it will sell Alico for $6. 8billion in cash and the remainder in MetLife equity.The deal leaves AIG as the second-largest shareholder of MetLife, with a stake of more than 20% in the company. On March 29, 2010, Bloomberg L. P. reported that after almost three months of delays, AIG had completed the $500million sale of a portion of its asset managem ent business, branded PineBridge Investments, to the Asia-based Pacific Century Group. 80 On September 30, 2010, AIG announced an agreement to sell two of its life insurance companies in Japan, AIG Star and AIG Edison, to Prudential Financial for $4. 2billion in cash and $600million in the assumption of third party debt to help repay some of the money owed to the U. S. government. 81 On November 1, 2010, AIG announced it had raised $36. 71billion from the sale of ALICO and an initial public offering for AIA. The company will use the proceeds Federal Reserve Bank of New York credit facility and make payments on other interests owned by the government. 82 On September 2, 2011, AIG filed with the SEC to spin off their aircraft leasing firm, International Lease Finance Corporation (ILFC), in an initial public offering. 83 edit Record losses On March 2, 2009, AIG reported a fourth quarter loss of $61. 7bn (? 43bn) and revenue of ? $23. 7bn ( 16. 2bn) for the final three months of 2008. T his was the largest quarterly loss in corporate history at that time. 84 The announcement of the loss had an impact on morning trading in Europe and Asia, with the FTSE100, DAX and Nikkei all suffering sharp falls. In the US the Dow Jones Industrial Average fell to below 7000 points, a twelve-year low. 8586 The news of the loss came the day after the U. S. Treasury Department had confirmed that AIG was to get an additional $30billion in aid, on top of the $150billion it has already received. 87 The Treasury Department suggested that the potential losses to the US and global economy would be extremely high if it were to collapse88 and has suggested that if in future there is no improvement, it will invest more money into the company, as it is unwilling to allow it to fail. 89 The firms position as not just a domestic insurer, but also one for small businesses and many listed firms, has prompted US officials to suggest its dying could be disastrous and the Federal Reserve said that A IG posed a systemic risk to the global economy. 84 The fourth quarter result meant the company made a $99. 29billion loss for the whole of 2008,88 with five consecutive quarters of losses costing the company well over $100billion. 89 In a testimony before the Senate Budget direction on March 3, 2009, the Federal Reserve Chairman Ben Bernanke stated that AIG exploited a grand gap in the regulatory system, and to nobodys surprise, made irresponsible bets and took huge losses. 90 edit 2009 employee bonus paymentsMain article AIG bonus payments controversy In March 2009, AIG announced that they were paying $clxvmillion in executive bonuses. Total bonuses for the financial unit could reach $450million and bonuses for the entire company could reach $1. 2billion. 91 President Barack Obama, who voted for the AIG bailout as a Senator92 responded to the planned payments by axiom Its hard to understand how derivative traders at AIG warranted any bonuses, much less $165million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat? and In the last six months, AIG has received substantial sums from the U. S. Treasury.Ive asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole. 93 pic pic Protester outside 60 Wall Street Deutsche Banks US main office in the raise up of the bonus controversy is interviewed by news media. Politicians on both sides of the congressional aisle reacted with outrage to the planned bonuses. Senator grub Grassley (R-Iowa) said I would suggest the first thing that would make me feel a little bit better toward them if theyd follow the Japanese example and come before the American people and take that deep bow and say, Im sorry, and then either do one of two things resign or go commit suicide. 94 Senator Chuck Schumer (D-New York) accused AIG of Alice in Wonderland business practices and said It boggles the mind. He has t hreatened to tax the bonuses at up to 100%. 95 Senator Richard Shelby (R-Alabama) said These people brought this on themselves. at one time youre honour failure. A lot of these people should be fired, not awarded bonuses. This is horrible. Its outrageous. 96 Senator Mitch McConnell (R-Kentucky) echoed his comments, saying This is an outrage. 97 Senator Jon Tester (D-Montana) said This is ridiculous. and AIG executives need to understand that the only reason they even have a job is because of the taxpayers. 98 Senator Dick Durbin (D-Illinois) said Ive had it. and The fact that they continue to do it while we pour in billions of dollars is indefensible. 99 Representative Barney Frank (D-Massachusetts), Chairman of the House Financial Services Committee, said paying these bonuses would be rewarding incompetence98 and These people may have a right to their bonuses. They dont have a right to their jobs forever. 96 Representative Mark Kirk (R-Illinois) said AIG should not be on welfare from Uncle Sam, and yet paying bonuses and transferring a considerable amount of taxpayer funds to entities overseas. 99 Federal Reserve Chairman Ben Bernanke said It makes me angry. I slammed the band more than a few times on discussing AIG. 96 Lawrence Summers, Director of the interior(a) Economic Council, said The easy thing would be to just say, you know, Off with their heads, and violate the contracts, but you have to think about the consequences of breaking contracts for the boilersuit system of law. 100 Austan Goolsbee, of the Council of Economic Advisers said I dont know why they would follow a policy thats really not sensible, is obviously going to dismount the ire of millions of people. and You worry about that backlash. 101 Political commentators and journalists expressed an equally two-party outrage. 94102103104104105106107108109110 On March 24, 2009, The New York Times printed the resignation letter of Jake DeSantis, executive vice president of AIGs financial prod ucts unit, to Edward M. Liddy, the chief executive of AIG.DeSantis stated he had nothing to do with the credit default swaps, he lost much of his life savings in the form of deferred compensation invested in the capital of AIG Financial Products he had agreed to work for an annual salary of $1 out of a sense of duty, that he was assured many times the bonuses would be paid in March 2009, and that he believed he and others were let down by Liddys lack of support. He also stated he was going to donate his bonus to those suffering from the global economic downturn. 111 It was reported that Senator Christopher Dodd (D-Con) (who first denied, then admitted to amending the legislation to allow the AIG bonuses), received $160,000 from employees of AIG. 112113114115 A memo issued in 2006 by Joseph Cassano, AIGFinancial Products chief executive, urged AIG employees to donate to Dodd, saying that as near in line to become chairman of the Senate Banking, Housing, and Urban Affairs Committee Senator Dodd will now have the opportunity to set the committees agenda on issues critical to the financial services industry. 116 edit Manchester United Sponsorship AIG was the header sponsor of English football club Manchester United from 20062010, and as part of the sponsorship deal, its logo was conspicuously displayed on the front of the clubs jerseys and other merchandise. The AIG deal was announced by Manchester United chief executive David Gill on April 6, 2006, for a British apparel sponsorship record ? 56. 5million, to be paid over four years (? 14. 1million a year).The deal became the most valuable sponsorship deal in the world in September 2006, after the renegotiation and subsequent debasing of the ? 15million-a-year deal Italian team Juventus had with oil firm Tamoil. During AIGs sponsorship, Manchester United enjoyed one of its most successful periods in history, winning the Premier unify three consecutive years, two Football League Cups, and the UEFA Champions Le ague. citation needed On January 21, 2009, it was announced that AIG would not be renewing its sponsorship of the club at the end of the deal in May 2010. It is not clear, however, whether or not AIGs agreement to top MU Finance will continue.American risk consulting firm Aon Corporation was named the clubs new principal sponsor on June 3, 2009, with its sponsorship of the club taking effect from the beginning of the 201011 season. The terms of the deal were not revealed, but it has been reported to be worth approximately ? 80million over four years. citation needed edit Share salvation Due to the Q3 2011 net loss widened, so on November 3, 2011 the AIG shares has plunged 49 percent year to date. The insurers board has approved the share buyback of as much as $1 billion. 117 edit Litigation pic This section needs additional citations for verification. beguile help improve this article by adding citations to reliable sources.Unsourced material may be challenged and removed. (Sep tember 2008) In November 2004, AIG reached a US$126million settlement with the U. S. Securities and Exchange Commission and the Justice Department partly resolving a number of regulatory matters, but the company must still cooperate with investigators continuing to probe the sale of a non-traditional insurance product. 118 On June 11, 2008, three stockholders, collectively owning 4% of the outstanding stock of AIG, delivered a letter to the Board of Directors of AIG seek to oust CEO Martin Sullivan and make certain other management and Board of Directors changes.This letter was the latest volley in what the Wall Street Journal deemed a public spat between the Companys Board and management, on the one hand, and its key stockholders, and former CEO Maurice Hank Greenberg on the other hand. 119 Death front Circa 2010 the WSJ reported that a family sued AIG for alleged complicity in a stranger-originated life insurance scheme, whereby AIG managers allegedly welcomed people without an insurable interest to take out life insurance policies against others. The case involved JB Carlson and Germaine Tomlinson, and was one of many similar lawsuits in the US at the time. 120 edit Accounting fraud claimsOn October 14, 2004 the New York State Office of Attorney General Eliot Spitzer announced that it had commenced a civil action against Marsh & McLennan Companies for charge clients to preferred insurers with whom the company maintained lucrative payoff agreements, and for soliciting rigged bids for insurance contracts from the insurers. The Attorney General announced in a release that two AIG executives pleaded guilty to criminal charges in connection with this illegal course of conduct. In early May 2005, AIG restated its financial position and issued a reduction in book value of USD $2. 7billion, a 3. 3 percent reduction in net worth. On February 9, 2006, AIG and the New York State Attorney Generals office agreed to a settlement in which AIG would pay a fine of $1. 6 billion. 121 edit Corporate governance edit Board of directors