AIG – Who Assures the Insurer?
AIG has been given a $85B loan by the U.S. Fed and the Fed has taken a 80% stake in the ailing company as part of a “rescue” plan. The plan came into action late in the day after the close of the market and is riddled with questions, the most glaring being; how does the government take an 80% stake in a publicly listed firm without “taking over” the company as it did with Fannie and Freddie? It would seem that this is an interim action for an obvious end result, designed to “soften” the eventual blow.
For now, the action seems to be working as this rescue plan is controlling the potential fall-out from the Insurance giant’s failure. The far reaching effects of such a failure would have been nothing short of globally catastrophic. As it stands now, the Insurance business holds no more assurances for its policy holders – who will insure the insurers should they fail like AIG did? The truth of every loophole of this business is coming into clear bright light this morning as AIA reveals the weaknesses within its infrastructure. Policy holders realize how fragile their once “assured” retirement plans are. There is no insurance and there are no guarantees. Today, we discover that when the worse happens, your nest egg is a fragile one. If that egg is in the hands of someone else, can you trust that someone with the rest of your life’s savings and dreams?
The business of Insurance is being re-written today and we are in the middle of change … what can we expect when we come out the other side?
So AIG, for now, is rescued. How assured are you that this rescue is permanent and reliable? AIG, for all the good news, is now $85B in debt. What does this debt do for your confidence in the company? How does the potential of a government take-over affect your trust in your insurance plan? What assurances do you have that your Insurance is assured?
Of the many inquiries I have taken over the last two years, one of the most frequently asked questions has been, “Why invest and trade rather than buy insurance? Insurance is safe, guaranteed and reliable.”
Today, you have your answer. It is only times like these that what I teach becomes vindicated. The value of the lessons learned will not be immediately realized. But the education will last and the knowledge earned can only improve and get wiser in time. The market has proven one thing for me … there are no guarantees in anything in life and money. The only assurance we have is that we can only trust in ourselves and make our own dreams come true ourselves. When we take control of our lives, we control our destination. Everything else is a gamble.
Education is forever. Knowledge is priceless. Wisdom is guaranteed.
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