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Are AIG MF investors safe?

AIG has borrowed nearly $150 bn from US Government ans its seeking more now. But hte total market cap og the company itself is $ 1 bn. Those of you worried about the state of AIG Mutual Fund can rest now.

The U.S. company was on the verge of declaring bankruptcy and needed up to $100 billion to stay afloat. Naturally, its shares plunged on Wall Street amid fears of its collapse.

But the government has come to the rescue of the American International Group (AIG).

Under the bailout deal, the U.S. Federal Reserve will lend AIG up to $85 billion to guarantee its short-term liquidity. But there will be a price for this lending hand. In return, the U.S. Government will take an 80% stake in the company with the right to veto the payment of dividends to shareholders.

This will save the company from bankruptcy. But it will need to sell assets to repay the loan, which will be due in 2 years' time.

An insurance company takes premium from people who've bought insurance and instead of investing it in safe instruments like bonds, starts guaranteeing CDS and other toxic instruments. We are in a situation where losses are being socialized and profits privatized.

Bailout may not be the right word. Bridge loan is the proper word. If we look at AIG's tentacles, they reach around the world. They touch all kinds of sectors and companies around the world. If it was left to fail, the effect of financial markets would be bad.

Meanwhile sources say, Tata AIG Life and Tata AIG General, AIG's largest business operations in India, have more than required solvency margins in Indian insurance JVs. Tata AIG insurance JVs together has nearly Rs 1500 crores in capital. Tata AIG policyholders & employees are safe & secure. Solvency in life insurance at 305%; general insurance at 176%. IRDA guidelines requires insurance business maintain 150% solvency margins. Tata AIG policyholders & employees are safe & secure. Insurance business fully funded as of now; no risk to business & policyholders. India insurance JV's employ nearly 9000 employees & there is no risk to staff. AIG India watching US situation on other businesses like PE, Asset management, Cons finance. AIG aircraft leasing business has 19-20 leased aircrafts with indian operations. AIG systems solutions, its captive bpo employs nearly 1100 employees. All AIG businesses in India continue to grow at a robust rate.

Below is the list of stocks held by Tata AIG in Indian companies :

  • Elecon Engg.Co
  • Action Construct
  • EMCO
  • McNally Bharat
  • Tata Motors
  • Tata Steel
  • Voltas
  • Zee News

Below is the list of stocks held by AIG Global Investment Corporation:

  • AIA Engg
  • Nucleus Software
  • Sun Pharma
  • Federal Bank
  • Mindtree
  • Ipca Labs
  • Bharati Shipyard
  • Gayatri Projects

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