Dubai and AIG - A Neutron Bomb Goes Off

A report on A.I.G. from the N.Y. Times -

An independent analysis of whether the insurance industry has been setting aside enough money to pay its claims estimates that the American International Group has a shortfall of $11.9 billion in its property and casualty business.

...researchers have raised doubts about A.I.G.’s total worth since it was bailed out last year, and even the federal government has acknowledged that the company might have difficulty repaying all the money it owed taxpayers, currently about $120 billion.

In a report distributed to clients on Monday, the investment research firm Sanford C. Bernstein pointed to a big shortfall in A.I.G.’s property and casualty insurance business — which has been renamed Chartis and is intended to be the future core of the company’s operations.

The stock fell by almost 15 percent, to $28.40 from $33.30, in trading on Monday. Bernstein cut A.I.G.’s price target by 40 percent, to $12 from $20. The report’s author, Todd R. Bault, called the results “a big surprise.”

When his first rough cut of the data “made no sense,” he wrote, he looked more closely at A.I.G.’s history of setting aside reserves over the last 10 years.
That’s when he identified a shortfall so large it was distorting the industry as a whole. He ran three separate tests, all described in the report, to make sure he was correct.

The Real Effect
The Dow's up 150 points. Double down! Double down!!!