From Mary Williams Walsh, a DealBook colleague:
The waves of financial trouble rippling across Europe could end up splashing on one American institution: the American International Group.
The American public and lawmakers whipped up a major outcry last year upon learning that the government’s bailout of the insurer had helped a number of European banks. Since then, A.I.G. has sought to unwind its derivatives business, which gave it a big exposure to Europe.
By now, A.I.G. had hoped to rid itself of a set of credit default swaps that it sold to European banks to help them comply with capital requirements. But regulatory filings show that the company still has significant exposure to these institutions at a time when Europe’s financial picture is awash in uncertainty.
Value of A.I.G. Regulatory Capital C.D.S. Contracts Net Notional Amount (in millions) Assets March 31, 2010 Dec. 31, 2009 Corporate loans $41,993 $55,010 Prime residential mortgages $65,844 $93,276 Other $1,552 $1,760 Total $109,389 $150,046
Source: A.I.G. regulatory filing.
In its latest quarterly report, A.I.G. listed the net notional value of the C.D.S. contracts at $109.4 billion as of the end of the first quarter. No one claims the company stands to lose that that full amount, and A.I.G. has already seen the termination or maturation of $25.6 billion in the first quarter....MORE