After a weekend of turmoil, shares of American International Group Inc. lost more than half their value in the first hour of trading.
AIG closed Friday at $12.14 per share. At noon today, a share of the insurer was worth $4.13.
Yesterday, AIG executives held talks with Kohlberg Kravis Roberts & Co. LP and J.C. Flowers & Co. LLC seeking to raise $20 billion in capital and sell $20 billion in assets, insiders told Bloomberg.
The insurer and the two buyout firms are based in New York.
AIG also sought a $40 billion bridge loan from the Federal Reserve as it fought to avert a ratings downgrade, according to The New York Times.
Advisers, though universally dismayed with what’s happening at AIG, have different takes on how the situation with the insurer will unfold.
“I’m confident that the insurance subsidiaries are sound and have sound investments and risk controls,” said Pasquale J. Sacchetta, president of CFIG Wealth Management in Westport, Conn.
He believes that a sale of the annuities business is unlikely, but were such an event to occur, the guarantees behind variable annuities might be up for question — a purchasing company may not honor the guarantees or may change the allocation of the subaccounts in order to ensure that customers can make guaranteed withdrawals without injuring the company’s capital.
John C. Visconti, a certified financial planner and senior adviser at New York-based UNFCU Financial Advisors LLC, hasn’t received any calls from clients — some of whom own AIG life insurance policies — but thinks the situation presents a red flag even if the company recovers.
“I believe they will get through it or the insurance at the state level will support the policyholders, but nobody wants to go through unnecessary anxiety of whether their policy is going to be honored or not,” he said.
“I’m just speculating, but a company with this kind of death song, where the news just slowly unravels: [The] Bear Stearns [Cos. Inc. of New York] happened quickly, Lehman Brothers [Holdings Inc. of New York] came over a few months, and AIG seems to be on deck,” Mr. Visconti added.
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