AIG Woes Not Seen Hurting Finances of Local Operations

The turmoil at insurance giant American International Group is not expected to have a serious financial impact on its Russian operations, which are kept completely separate from the parent company, a source said Wednesday.

U.S. authorities engineered an $85 billion rescue of AIG on Tuesday, staving off bankruptcy and bringing a measure of calm to shell-shocked global markets. The bailout marked a reversal of Washington's vow not to step in and calls for the U.S. Federal Reserve to lend up to $85 billion to AIG for two years in exchange for a 79.9 percent equity stake.

Officials at AIG's two Russian subsidiaries, AIG Life and AIG Insurance & Reinsurance Company, declined comment on the bailout Wednesday.

A source at one of the subsidiaries told Interfax that the problems at the parent company were unlikely to seriously affect the finances of the Russian subsidiaries because the units are essentially independent entities.

The source also said AIG was not yet considering selling the subsidiaries to raise cash. AIG has promised to sell assets to repay the U.S. government for the $85 billion bailout.

"The issue of selling some assets is being considered, but this will not affect the insurance business," the source said. "They will probably talk about selling the aircraft leasing company, a subsidiary of which works effectively on the Russian market and is a partner of Aeroflot in leasing planes."

AIG has indicated that it was considering selling its profitable aircraft-leasing unit, International Lease Finance Corporation, which is the largest company of its kind and lends aircraft to most airlines around the world.

Some insurance industry insiders expressed doubt that AIG would sell its Russian business, saying the subsidiaries were worth pennies compared to the big cash infusion that the company needed, Interfax said.

Interfax valued AIG Life at $400 million and AIG Insurance & Reinsurance at $200 million.

(MT, Reuters)