AIG Problems Prompt VALIC Questions

If your ORP or TDA account is with AIG-VALIC, you may want to read Wednesday's post from AIG corporate headquarters. Recent disturbing economic developments have raised questions regarding the safety of all retirement accounts, even if the money is insured by contract. AIG has been prominent in the news lately and AIG-VALIC is a popular choice in Texas for ORP/TDA participants.

Yesterday, after media reports regarding the financial difficulties of AIG, the U.S. Federal Reserve system announced an $85 billion loan to prop up the global giant. AIG is the parent company of VALIC. Background information from the Associated Press is available here.

Here's the link to the press release, which was issued prior to the reported "bailout" by the U.S. government. According to the post, AIG is a separate company from VALIC, which operates under discrete rules of governance and Texas insurance statutes. You may wish to pay particular attention to whether your account is in the "fixed" or "variable" category, and whether the revenue is in a mutual fund. These categories are treated separately in the press release, since their status and security may vary.

A recent report from USA Today indicates that AIG will have to sell some of its assets to pay back the federal government. There is no mention of VALIC in the article.

From the USA piece:

One business that it makes less sense for AIG to unload, says Andrew Kligerman, an insurance analyst at UBS, is the foreign life insurance business. He considers that the company's "premier" entity.

The business is a market leader in Asia, giving AIG "a competitive edge," he says.

The Federal Reserve, after coming to AIG's aid, will likely have a role in figuring out which assets the company will sell, says Vinnie Aggarwal, chief economist at Frost & Sullivan, a consulting and market research firm.

AIG's sale options are wide. The sprawling conglomerate — which got its start as a property/casualty insurer in Shanghai in 1919 — owns everything from insurance and retirement businesses to the Stowe Mountain ski resort in Vermont.

Despite the asset sales, the company's troubles are far from over.

Your humble scribe is way over his head in these areas, but will pass along reports that seem germane to TRS and ORP.

Comments

[Mary McNulty]

I have spent more than six months vainly trying to rollover retirement funds from a VALIC 403B to a TIAA-CREF IRA. VALIC representatives have told me bare-faced lies about when forms were sent to or received from me and my former employer's plan administrator. It's a nightmare dealing with VALIC. Avoid them at all costs.