AIG Continues To Bleed....Badly!

American International Group (AIG) incurred a record loss of US$62 billion last quarter!

Here are some startling statistics:
- The loss occurred in just 92 days, i.e., $470,000 a minute! And it's more money than Bill Gates' net worth.

- The quarterly loss was the biggest in corporate history, topping the previous record of about US$45 billion set by Time Warner Inc. during the fourth quarter of 2002.

- AIG continues to bleed, despite U.S. Government bailout fund of US$150 billion! Now AIG is asking for another US$30b!

- AIG's quarterly loss is about 12 times the $5.3 billion it lost in the same quarter of 2007. That was more than half the US$114.53 billion lost by nearly all other Standard & Poor's 500 companies combined in the fourth quarter. This represents also the first quarter ever that the S&P 500 has tallied a loss.

- AIG lost more in the fourth quarter of 2008 than it made from 2001 to 2007!

- If $62 billion was distributed across the U.S. population, Americans could each get about $200!

- AIG's loss amounts to 92 percent of the US$67.4 billion that Americans spent at world's largest retailer Wal-Mart Stores in the fourth quarter, which includes the holiday season.

- It would take a person spending $1 million per day, everyday, the next 169 years to spend as much money as AIG lost during the fourth quarter, which lasted just 92 days!

I really wonder how on earth a once proud insurance giant would now become such a miserable sick patient?!

Measure To Boosting Banking Sector and Confidence

Following the footsteps of Hong Kong, Australia, Ireland, Germany, Denmark and Greece to fully guarantee bank deposits, Malaysia Government likewise has announced that they will fully guarantee, with immediate effect, all ringgit and foreign currency deposits with commercial, Islamic and investment banks regulated by Bank Negara.

The Central Bank and the Ministry of Finance said in a joint statement the guarantee also extended to deposit-taking development financial institutions regulated by the central bank.

The deposits would be fully guaranteed by the government through Perbadanan Insurans Deposit Malaysia (PIDM) until December 2010.

The guarantee extends to all domestic and locally incorporated foreign banking institutions; and access to Bank Negara’s liquidity facility will be extended to insurance companies and takaful operators regulated and supervised by the Central Bank.

The above move will indeed shore up the country's banking sector in terms of consumer and business confidence. At the same time, this should prevent potential outflow of funds from the country to other countries (particularly Singapore) that offer the full guarantee.

In the same accord, the Singapore Government has also announced full deposit guarantee.

Related Story: How Safe Is Your Money In the Bank?

How Safe Is Your Money In the Bank?

Given the current crisis surrounding many global financial institutions and their recent collapses and/or near collapses, question must be asked about how safe is it with your money deposited in your local and overseas financial institutions?

Well, for most of the advance and developing countries, the funds in the banks are most likely insured or guaranteed, but subject to a certain limit. In the case of Malaysia, all bank deposits in financial institutions licensed under the Banking and Financial Institutions Act 1989 are automatically insured under the Deposit Insurance Scheme administered by Perbadanan Insurans Deposit Malaysia (PIDM). All financial institutions are automatically registered with PIDM, thus the compulsory deposit insurance which members pay. This covers both commercial either conventional or islamic bankers.

Insurable deposits include:
- All deposit products including current, savings, fixed and investment deposits;
- Certified cheques, bank drafts and other similar payment instructions drawn or made against a deposit account

Non-insurable deposits include:
- Deposits not payable in Malaysia
- Foreign currency deposits

Please take note that the limit for the above guarantee is only up to RM60,000 (US$17,242) per depositor per member institution. This limit covers both principal amount and interests, and applies separately to both conventional and Islamic deposits.

The following financial institutions are however, not covered under the deposit insurance scheme:
- Merchant banks and discount houses (which do not accept retail deposits from the public)
- Overseas branches of domestic financial institutions
- Development financial institutions, including Bank Simpanan Nasional,
Bank Pertanian Malaysia and Bank Kerjasama Rakyat Malaysia Berhad
(which are either backed by Government guarantee or by their status as statutory bodies)
- Insurance companies (which are separately covered under the Insurance Guarantee Scheme Fund established by the Insurance Act 1996)
- All non-bank financial intermediaries such as provident and pension funds, co-operative societies, housing credit institutions and building societies, which are not supervised or regulated by BNM.

For more information on PIDM, please visit this link.

In U.S., the insurance deposit limit per depositor per FDIC-insured bank is US$250,000 for the period from October 3, 2008, through December 31, 2009. Normal coverage is up to US$100,000. For more information, please visit this link.

For European Union, the minimum bank deposit guarantee has just been raised yesterday to euro50,000 (US$68,160). However, not all European countries adopt the same policy.

Are You Exposed To AIG Insurance?

Following the troubled American International Group's (AIG) rescue plan by the US Government, sentiment against AIG has grown in Asia for the past two days, particularly in countries such as Singapore, Taiwan, Hong Kong and South Korea. A number of policy holders were seen asking for policy cancellations, in view of the company's current financial turmoil and fearful of potential losses from another potential bankruptcy.

The fears were understandable, given that the bailout from US Government will not guarantee its survival.

Bear in mind that early redemption values for insurance policies are often undesirable and come with high "costs". In some cases, the policy holder may also suffer "financial losses" due to early termination.

In Malaysia, the company is known as American International Assurance (AIA), a wholly owned subsidiary of AIG.

For the full story, please click this link.