AIG's Bermuda operations may be safe for the moment from hungry competitors eager to buy up the troubled insurer's assets as it struggles with the terms of its $85 billion loan from the US Federal Reserve, one industry analyst believes.

And, a new study based on risk managers' attitudes towards the company shows that confidence in AIG remains high despite dismay over and heavy fallout from the liquidity crisis the company found itself in last month when it was unable to stem the haemorrhaging from its Financial Services unit.

AIG's Bermuda-based companies are seen as important pieces of the company's core property and casualty business, said David Bradford, executive vice-president of Advisen, a New York and London based industry analyst group.

While pressure is immense on the company to sell what assets it can to pay down the Fed's $85 billion loan — and avoid unnecessarily mounting 8.5 percent interest (see related story on Page 26) — newly appointed CEO Edward Liddy has said core insurance operations are off the table, Mr. Bradford said.

"Even if AIG were to try and sell core businesses, it would be very difficult to quickly unload complex businesses with billions of dollars of long-tail liabilities on their books," he said.

More independent entities may be most attractive to buyers, he added: "My guess, as concerns the US companies, is that the most autonomous companies serving well-defined market segments, such as Audubon, 21st Century and Hartford Steam Boiler will be the first to go."

He added: "Liddy will have to seriously consider any reasonable offer for any piece of AIG, but at the same time he will need to think strategically. To the extent that AIG's Bermuda-based companies are seen as important pieces of the core P&C business, they are less likely to be sold."

AIG has a 60-year history in Bermuda and is believed to employ around 200 people on the Island — 75 percent of which, the company has said, are Bermudians or spouses of Bermudians. Speaking to the company's employees in 130 countries worldwide immediately after the Fed deal was struck, Mr. Liddy warned staff there would be pressure to sell off profitable units. "There's great confusion, and our competition, God love them, is going to prey on that confusion," he said, according to Bloomberg. "They want to get our business one policy at a time."

But if it can stave off the pressure, AIG may be able to ride out the crisis period, Advisen's recent survey of risk managers suggests. Advisen surveyed 1,000 industry professionals between September 23 and 25 and found: "Most commercial insurance buyers claim to be confident in the financial strength of American International Group (AIG)."

Sixty-eight percent said they were "very confident" or "somewhat confident" in AIG security, the study found, and only one percent of brokers had recommended that policyholders replace AIG immediately. Despite this confidence, Advisen found that 71 percent of policyholders would consider alternatives to AIG at policy renewal time, meaning the company may have to compete vigorously to retain business.

Advisen also found a high level of understanding that AIG's crisis stemmed from one of its nine units — the Financial Services unit which dealt with credit default swap (CDS) and was decimated by the meltdown of the US subprime mortgage market — but from which the profitable insurance units are protected.

"At the parent level, AIG has nearly $80 billion in shareholder equity, but most of that is locked in the insurance operations and cannot be liquidated to meet the collateral needs of the financial services unit," Advisen noted in its report.

But the findings of the survey were not all positive for AIG, with respondents expressing concerns over the actions of the company's executive management, damage to its reputation, possible defections of key personnel and possible further rating agency downgrades.

"Insurance operations are stable, but the reputational damage has been done," one survey respondent told Advisen. "AIG insurance will suffer due to the name and the affiliation with the parent company issues," another noted.

The reputation of Bermuda's AIG operations has already been challenged after local subsidiaries were caught up in investigations of accounting irregularities investigated by the US Securities and Exchange Commission (SEC) while under the tenure of long-time CEO Maurice (Hank) Greenberg.

Mr. Greenberg is said to be among those now looking at purchase of AIG's assets and subsidiaries of interest.

The terms of the Fed loan are tight on AIG and Mr. Liddy has said the intention is to get out from under the loan as quickly as possible.

"I don't want to get things done 740 days from now and say, 'Oh, we just made it by the skin of our teeth,'" Mr. Liddy, told employees on September 18. "As soon as it is paid down, and we no longer need it, we get control of the company again."

Mr. Bradford said AIG's hands were essentially tied when the company took the loan and, if a $700 billion bailout plan for the finance industry going back before the US Congress tomorrow is successful, AIG may too see some release of pressure.

"As I understand the situation, AIG would have already had to seek protection in the bankruptcy courts without the loan," Mr. Bradford said when asked whether AIG might have been better off waiting for the bailout plan rather than accepting the loan on September 15.

"When the credit agencies cut AIG's ratings, they simply could not come up with the cash necessary for the resulting demand for collateral. If the bailout is passed by the House, and/or if the mark-to-market accounting rules are revised, I assume it will benefit AIG, relieving some of the demand for collateral.

"Senior AIG officers have told me this is a matter of timing — once the mess is sorted out and the CDOs (collateralised debt obligations) are more realistically valued, the actual losses AIG will pay under the credit default swaps will be only a fraction of the collateral the company has had to post."