Photo Credit: eflon
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The title of the article comes from a comment Greenberg supposedly made to Buffett when AIG was much bigger than Berkshire Hathaway [BRK-A] — times change…
It’s come to this: AIG has sought out reinsurance from BRK to cap the amount of losses they will pay for prior business written.  It’s quite a statement when you are willing to pay $10 billion in order to have BRK pay 80% of claims over $25 billion, up to $20 billion in total.  At $50 Billion in claims AIG is on its own again.
So what business was covered? Â A lot. Â This is the one of the biggest deals of its type, ever:
The agreement covers 80% of substantially all of AIG’s U.S. Commercial long-tail exposures for accident years 2015 and prior, which includes the largest part of AIG’s U.S. casualty exposures during that period. AIG will retain sole authority to handle and resolve claims, and NICO has various access, association and consultation rights.
Or as was said in the Wall Street Journal article:
The pact covers such product lines as workers’ compensation, directors’ and officers’ liability, professional indemnity, medical malpractice, commercial automobile and some other liability policies.
Now, AIG is not among the better P&C insurance companies for reserving out there.  2.5 years ago, they made the Aleph Blog Hall of Shame for P&C reserving.  Now if you would have looked on the last 10-K on page 296 for item 8, note 12, you would note that AIG’s reserving remained weak for 2014 and 2015 as losses and loss adjustment expenses incurred for the business of prior years continued positive.
For AIG, this puts a lot of its troubles behind it, after the upcoming writeoff (from the WSJ article):
AIG, one of the biggest sellers of insurance by volume to businesses around the globe, also said it expects a material fourth-quarter charge to boost its claims reserves. AIG declined to comment on the possible size. Its fourth-quarter earnings will be released next month.
