Page last updated at 15:55 GMT, Wednesday, 22 October 2008 16:55 UK

Crisis 'brought AIG to its knees'

AIG chairman Edward Liddy
Mr Liddy has freely admitted that AIG made mistakes

The new boss of US insurance giant American International Group (AIG) has shed more light on why the firm had to be rescued by the Federal Reserve.

AIG required an $85bn (52bn) loan from the Fed last month in order to avoid financial collapse in the face of the global credit crisis.

Chief executive Edward Liddy, who was appointed under the rescue deal, said AIG "had been brought to its knees".

He told the BBC that AIG's financial products "weren't particularly good".

'Mistakes'

Mr Liddy said that in retrospect, the company was wrong to move out of its general insurance expertise to add policies covering financial products and transactions.

"We would have been OK except when the credit crisis hit, it really exposed some mistakes we had made," he said.

Mr Liddy added that it was this combination of mistakes and the credit squeeze that meant AIG "needed a life preserver to help be around today".

Looking ahead, he said the $85bn of taxpayers' funds would be enough to turn around AIG's fortunes and that it would be "a great company coming out".

'Quite well'

To help repay the $85bn, Mr Liddy said AIG would now be selling off a number of assets.

Despite the continuing squeeze in the credit markets and signs of a wider global economic slowdown, he said it expected no problems in selling the assets, which he called "some very wonderful products".

Saying that AIG was now "moving along" in the sale process, he refused to be drawn on any potential buyers.

"Clearly we'd rather be selling in more robust times, but I think we'll do quite well in terms of the valuations," he said.

'Apologise'

Turning his attention to the recent revelations that AIG had spent hundreds of thousands of dollars on corporate events since the rescue deal, Mr Liddy said the company had "been embarrassed" by the reports.

"I apologise to people for them," he said.

Mr Liddy said the firm had moved quickly to cancel 160 corporate events, saving $180m.

"Using the battleship analogy, it just takes time to get it stopped or to get it turned," he added.

"In almost all cases, we are going back and we are recovering every single penny from expenditures made in those kind of events, and preventing them happening in the future."


RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites


FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC navigation

BBC © 2013 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific