The Case for AIG - Patience Required

Extremely big investors have  recently injected $20 billion of new equity into the company [on top of the  previous billions from just a few months earlier]. They did this for only one  reason- they believe the company's core insurance business has been, and will  remain, very profitable.

The portfolio of securities has been the  problem. At today's 'fire sale' prices and with no ready bidders, the  accountants have forced AIG (AIG) and other financial firms to 'write-down' their  holdings to market value. Nobody can say exactly what they will ultimately be  worth but it is almost certainly much more than current liquidation prices.

By supplying the big capital infusion the new investors have avoided the forced sale of these illiquid securities at bad prices. AIG can now hold them until maturity or until the market prices come into line with their true values. At tha