AIG continues to head sharp fall in sector prices

As with the previous period, the travails of the world’s biggest insurer, AIG, were a big pre-occupation for the financial markets over the two weeks ending 29th May. This was despite the fact that AIG’s prospects received something of a boost halfway through the period when, setting out to raise $12.5bn, it actually collected $20.3bn as a result of the strong demand for its equity and debt offerings. But too many other negative factors were chipping away at the confidence of the market. The now ever present devil of the piece, the oil price, surged to another record high: this time not only reaching $133.0 a barrel, but reaching it the very next day after AIG’s capital raising triumph. Which turned out to be not such a truimph when a Citigroup analyst said it would not be enough: AIG would need all of that money just to prop up its loss making Financial Products subsidiary. The prospects of AIG’s core insurance businesses were also called into question.