American International Group’s new chief executive officer, Edward Liddy, said he plans to keep the core insurance property-casualty business as he decides how to sell off assets to pay a government-backed $85 billion bridge loan.

According to reports, Mr. Liddy said he plans to rebuild the New York-based insurer into a smaller but much more nimble company by the time the process is finished. He said he does not plan to liquidate the company as he sells assets to pay back the government-backed loan. The Federal Reserve extended AIG an $85 billion loan as it suffered a liquidity problem and was close to filing bankruptcy. The action was taken for fear that the company’s failure would rock the global economy to its core and set off a chain reaction that would prove to be an economic disaster.

In return for the loan, the government now owns 79.9 percent of AIG and gave the company 24 months to pay back the loan at an interest rate of more than 11 percent. Liddy said he does not have much time to decide which assets to sell. A task force led by New York Insurance Superintendent Eric Dinallo and other insurance commissioners will oversee the sale of AIG assets. Liddy, the new AIG CEO, was chairman and CEO of Allstate until his retirement in 2006.

Reports from the National Underwriter and Insurance Journal.

New AIG CEO Liddy Plans to Keep P/C Business at AIG’s Core (National Underwriter 9/19/08)

September 24, 2008