AIG crisis worsens

AIG Latest News Updates: . The State of New York has announced a "multi-billion dollar financing plan" to stabilise the finances of American International Group (AIG).

Struggling insurance giant American International Group (AIG) will be allowed to use $20 billion of assets held by its subsidiaries to provide cash needed to stay in business, New York Gov. David Paterson said Monday.

The move comes as AIG continues to review operations and discusses alternatives with outside parties, reportedly including Warren Buffett's Berkshire Hathaway, to shore up its business amid concern the world's largest insurer could need billions of dollars to strengthen its balance sheet.

Paterson asked New York state insurance regulators essentially to allow New York-based AIG to give itself a bridge loan. The governor has also asked the head of New York's insurance department to talk with federal regulators about providing an additional bridge loan.

"AIG still remains financially sound," Paterson said.

The move will allow the company to use those assets as collateral to borrow cash to fund day-to-day operations, Paterson said.

"Wall Street's continuing problems should serve as a stark reminder that this recession is far from over. New York State has taken the first step towards helping to stabilise AIG, which is otherwise a very healthy company," said Mr Paterson.

"On a state level, we were able to reach a market-based solution that will stabilize AIG at no cost to New York taxpayers," he said.

He added that policyholders and their insurance policies would be safe.

AIG is under pressure to raise capital after posting three quarterly losses in a row totalling $18.5bn (£10.3bn).

Shares in A.I.G. tumbled more than 60 percent on Monday morning as concerns grew that the firm lacked capital to withstand cuts to its debt rating, which were borne out later in the day. The company’s potential write-offs are mounting and may reach $60 billion to $70 billion, according to two people briefed on the situation.

Concern over the future of AIG heightened today Tuesday 16th Sep after two credit agencies cut their ratings on AIG's debt, in a move that will drive up its cost of borrowing and put its $75 billion (£42 billion) fundraising efforts in jeopardy.

The credit downgrades by Standard & Poor  and Fitch Ratings come as bankers working for AIG, until recently the world's biggest insurer, battle to secure an emergency financial package that would stop the group becoming the latest victim of the credit crunch.

It is understood that Goldman Sachs and JPMorgan Chase are trying to raise the money, partly ultilising the  emergency credit line rescue offered from the US Federal Reserve

About AIG:

American International Group, Inc. (AIG) is a holding company which, through its subsidiaries, is engaged in a range of insurance and insurance related activities in the United States and abroad.

AIG's primary activities include both General Insurance and Life Insurance & Retirement Services operations.

Other significant activities include Financial Services and Asset Management. AIG's reportable segments by product or service line are General Insurance, Life Insurance & Retirement Services, Financial Services and Asset Management.

AIG provides its products and services in more than 130 countries and jurisdictions.

In 2006, AIG acquired Travel Guard International, a provider of travel insurance programs and emergency travel assistance.

In September 2007, AIG announced that it has completed the merger of a wholly owned subsidiary of AIG with 21st Century Insurance Group (21st Century). Upon consummation of the merger, AIG acquired remaining 39.3% interest in 21st Century