AIG Uses Accounting Gimmick To Reduce Money It Owes Taxpayers By $25 Billion

AIG hq

American International Group says it has slashed the amount of money it owes the government by $25 billion after moving two subsidiaries into special holding units ahead of their planned spinoffs or sale.

How could this be? Didn’t a Sanford Bernstein analyst just discover that AIG had a new $11 billion hole in its balance sheet?

As it turns out AIG has reduced its debt to taxpayers without paying back a dime of the money it borrowed. Instead, it is just engaging in accounting chicannery to transfer the obligations to a pair of companies it is spinning off.

The government is receiving $25 billion in preferred shares in the two life insurance companies, American International Assurance Co. and American Life Insurance Co. AIG will continue to hold the common shares of AIA and Alico until it decides whether to sell the companies privately or IPO them. Then, at last, some of the taxpayer money may be repaid.

Here is the official press release from AIG.


NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at