AIG's CEO Liddy: We don't need more government money

CHARLOTTE -- American International Group's CEO Ed Liddy is planning to tell Congress his embattled insurance company does not need more bailout money.

In testimony he is scheduled to deliver to Congress on Wednesday, Liddy said the New York-based firm has "reduced, but not yet eliminated, the systemic risk that AIG presents to the global financial system."

In prepared remarks to the House Committee on Oversight and Reform, Liddy describes a plan the company devised that would put "AIG's troubles behind it, repay the monies that we owe the American taxpayer, and secure an outcome that helps to put the American economy back on track."

AIG has received $182.5 billion in financial support from the government since September.

Liddy said his company is stabilizing and won't need further government support. But he cautioned that the economy would be a factor in how much time will be needed to carry out AIG's recovery program.

"How long the plan will ultimately take will very much depend on how quickly and how strongly the global economy recovers," Liddy said, according to the prepared remarks. "Because we are all committed to ensuring that the mistakes of the past are not repeated, we must take the time and exercise the diligence to do this restructuring properly."

The U.S. government provided AIG with an $85 billion loan in September. As market conditions worsened and losses piled up at the insurer, the government revised and expanded its loan package to AIG several times.

The package of loans now totals nearly $180 billion after being expanded in March when AIG reported a fourth-quarter loss of $61.7 billion, the largest ever quarterly corporate loss in U.S. history. AIG reported a narrower loss of $4.35 billion in the first quarter, versus a loss of $7.81 billion in the same period a year ago.

As part of the loan package, the government has also taken a roughly 80% stake in the huge insurance company.

AIG was devastated not by its traditional insurance operations, but by its financial products business, which underwrote risky credit derivatives contracts known as credit default swaps. The swaps are essentially insurance contracts protecting an investor against default on an underlying investment, such as mortgage-backed securities.

Rising defaults in the investments AIG's contracts were insuring led to worries that AIG would not be able to cover all of its obligations and that the ripple effects would touch of a new, even more intense phase of the credit crisis. That's when the government stepped in, fearing that without its help, AIG's collapse would cripple financial markets in the U.S. and around the world.

In his testimony, Liddy said AIG has reduced its exposure to those derivatives to $1.5 trillion in face value, compared with the original amount of $2.7 trillion.

Liddy also said AIG is working to divest properties to repay taxpayers, but does not intend to sell assets at "fire-sale prices." The company has said it plans to retain its U.S. property and casualty and foreign general insurance businesses, and a stake in its foreign life insurance operations.

On Monday, AIG said it would sell its Japanese headquarters to Nippon Life Insurance Co. for $1.2 billion in cash. The transaction, which is among the biggest divestitures the company has made to reimburse the government, is expected to close in the second quarter.

Last month AIG sold its car insurance unit, 21st Century Insurance, to Zurich Financial Services Group for $1.9 billion. The transaction is the largest divestiture by AIG since September, and one of 11 asset sale agreements it has reached the past few months.

Recent media reports have also said AIG may also be nearing a deal to unload its airplane leasing business, International Lease Finance Corp.

In March, AIG said it would spin off AIU Holdings, its property and casualty insurance business, and give the company its own board of directors, management team and brand distinct from that of the embattled company, which has also been embroiled in controversy surrounding bonuses paid to employees. In April, AIG transferred AIU Holdings to what's known as a special purpose vehicle in preparation for the potential sale of part of the business.