The cancer is gone and the patient is doing well...
News that the US Treasury has made a profit (so far) of approx. $15 billion on its $182 billion investment in AIG is being hailed as justification for what was, at the time, the largest single gamble in history by a US Government faced with certain economic meltdown.
But was it such a gamble? Was AIG ever truly broken or was it more a case of one cancerous element within the organisation that needed cutting out? Yes, the group needed cash flow at a critical time and the US Government stepped in to provided it, but, in the panic did we lose sight of the fact that the fundamentals of the core insurance operations always remained strong and, more importantly could support AIG in 'trading out' of the mess they found themselves in? If so, then maybe it was a 'gamble' in name only.
Did the new management believe in AIG's recovery potential? If so, why then did they feel the need to change the name of the main property and casualty trading entities to Chartis only to initiate in recent months a complete u-turn and bring the old AIG brand back to the market?
Fear of the unknown is a great motivator but it was disappointing that management felt the need to make what, in hindsight, will be viewed as poor judgement.
Given that the insurer has returned to profitability, reporting a second-quarter profit of $2.3 billion, 27% more than a year earlier and much higher than expected, was there ever any real doubt that the world's former largest insurer would not only survive the marathon operation but that the cancer could be successfully removed and the organisation put back on the road to full recovery? Not only has this been achieved but it looks like AIG has come back better and stronger than ever.
Well done to all concerned and welcome back AIG.