AIG Writedowns May Rise $30 Billion on European Swaps (Update1)


By James Sterngold

Dec. 17 (Bloomberg) -- American International Group Inc., which already
has suffered more than $60 billion in writedowns and losses, may have to
absorb almost $30 billion more because of flaws in the way its holdings
are valued.

An examination of AIG’s credit-default swaps guaranteeing more than $300
billion of corporate loans, mortgages and other assets not covered by a
$152.5 billion federal rescue shows the New York-based insurer may value
some of its positions at levels that don’t reflect distress in the
markets, according to an analyst at Gradient Analytics Inc. and a tax
consultant who teaches at Columbia University Business School in New
York. Executives at two firms that have similar investments say they
account for the securities differently than AIG does.

“Every time I look at their statements I find something new,” said Donn
Vickrey, executive vice president of Gradient Analytics in Scottsdale,
Arizona. He estimated that AIG may need to take at least $28 billion in
additional writedowns on swaps covering European corporate loans and
prime residential mortgages, as well as collateralized loan and debt
obligations.

“It looks like they haven’t written down these positions fully yet, and
that could be a real problem,” said Vickrey, who predicted correctly, as
early as February 2008, that the company would have to report increases
in its writedowns on its swaps.

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What a pack of crooks and thieves. There's nothing quite like corporate
welfare. Still has an A rating from A.M. Best, but with a negative rating.