aig buildingMore than four years ago I first wrote about AIG. “Almost Insolvent Group” I called them. Everyone had some type of acronym for them. AIG was stuck in the middle of the financial crisis. Too big too fail, done in by their own greed. They were bailed out. Now they’ve emerged much leaner company. They’re a shell of what the old AIG was. So how did they survive?

Let’s look back in time a bit and see how they screwed themselves so hard in the first place. AIG was a classic case of the left hand not knowing what the right hand was doing. Without getting too complicated, AIG offered mortgage insurance for tons of borrowers. But then they would collect premiums and invest them in mortages. They doubled down housing and got double screwed when it went bust. Because of the size of their operation and vast amount of contracts they’d written, they were too big to fail.

They were bailed out in order to make their contracts whole. This was considered a backdoor bailout of Wall Street. AIG was bailed out and that money was used to pay what was owed to the banks who themselves needed cash badly to survive.

Over the years since AIG has sold off many of its units and businesses. AIG is now back to a simple insurance company. You can get car insurance and life insurance from them. AIG still collects premiums and invests them just as they always did. This is how insurance companies make money.

But the company is now in a rebuilding mode. Leaders are able to focus on growing business, hopefully in a responsible manner now. The dangers persist though. The next CEO is likely a guy who years ago helped invent some of the very financial products that screwed up AIG in the first place. In the history of finance though it’s not the creators of financial products that abuse them. For instance, the subprime loan is a legitimate and useful product for investors and customers alike. But it was abused by both sides.

Likewise AIG is trying to relaunch their brand while the ghosts of their past sue the government. Despite being saved by the government some shareholders like Hank Greenberg think they got a raw deal. AIG decided not to pursue the lawsuit with Greenberg which from a PR perspective was the right move.

But honestly I question the PR and brand decisions they’re making anyway. AIG was perhaps the most tainted brand to have survived the financial crisis. Countrywide is gone, Lehman Brothers is dead, do we even remember Bear Stearns? AIG wasn’t known to retail customers as an insurance brand. They instead operate through brands like National Union Fire Insurance Co and 21st Century.

They do this for a variety of reasons. These days it makes sense because people probably don’t want to know they’re doing business with AIG. Would you buy insurance from AIG if their ads came after GEICO or Progressive? You’d think twice for sure. Why AIG kept that name at all surprises me. Rebranding the whole firm would not be a bad idea.

They would be far from the first company to do such a thing. Just look at Altria. Never heard of it? You may be more familiar with Philip Morris, its predecessor. AIG should consider something like that.

But here’s what should matter to you today. AIG has paid their money back and the US no longer has a financial stake in the company. Most everyone you could hold responsible for the financial crisis that worked at AIG are gone. All that’s left are a few relatively conservative insurance companies and for some reason a ski resort. One way or another, let’s hope we never hear from AIG again.

Read: America’s Improved Giant (The Economist)

Image: jdiggans

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categories: business, government