AIG Financial Products Corp.

AIG Financial Products Corp., commonly known as AIGFP, was a financial-products subsidiary of American International Group that served institutional clients through over-the-counter derivatives, structured finance and related risk-management activities. Its business relied heavily on complex credit-derivative transactions, including credit default swaps. During the global financial crisis of 2008, the portfolio faced severe collateral calls and valuation losses, becoming a major contributor to AIG's liquidity crisis. The subsequent U.S. government rescue of AIG was followed by a sharp contraction of AIGFP's activities. Because the later legal-entity structure, asset disposals and wind-down arrangements are complex, its current status as an independently operating brand is not sufficiently clear from reliable public information.

AIG Financial Products Corp. was founded by Howard Sosin in the late 1980s and later became a major financial-products platform within AIG. It served institutional clients through over-the-counter derivatives and structured-finance transactions. Before the financial crisis, the business expanded rapidly, and transactions such as credit default swaps generated revenue while exposing the company to substantial tail risks. When U.S. housing and credit markets deteriorated in 2008, the portfolio was hit by rating downgrades, collateral calls and market-value changes. AIG could not meet the resulting funding requirements on its own and ultimately received an emergency rescue led by the U.S. government. After the crisis, AIGFP's activities were sharply reduced, while AIG disposed of or restructured related assets, contracts and exposures. The later status of its legal entities, wind-down arrangements and brand usage is complex and not sufficiently documented to confirm that it remains an active operating brand.

• 2008

  Financial Crisis Impact

  [2]Federal Reserve Board notice concerning AIGgovinfo.gov

  AIGFP's credit derivatives trading faced margin calls and valuation pressures, becoming a significant factor in AIG's liquidity crisis and government bailout.

• 1987

  Company Founded

  [1]AIG Financial Productsen.wikipedia.org

  Howard Sosin founded AIG Financial Products, which subsequently became AIG's financial products platform.

Institutional over-the-counter derivatives and structured finance platform

• Credit derivatives

  Credit default swaps

  AIGFP participated in credit default swap transactions for institutional clients to transfer or assume credit risk. These transactions generated significant collateral and valuation pressure during the 2008 financial crisis.

• Financial derivatives

  Over-the-counter derivatives

  The company offered customized over-the-counter derivative transactions primarily for institutional clients, with structures linked to interest rates, credit, foreign exchange or other financial variables.

• Structured finance

  Structured finance

  AIGFP engaged in structured-finance activities that combined financial assets, credit risks or cash flows into complex transactions for institutional clients.

• 2008

  Credit Derivatives Risk and AIG Crisis

  AIGFP's credit derivatives portfolio generated massive collateral and funding pressures after market deterioration, becoming a key factor in AIG's crisis and government bailout.

  Source

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• 2008

  Significant Contraction of Financial Products BusinessStrategy

  Background

  The financial crisis led to severe liquidity and valuation pressures on the related credit derivatives portfolio.

  Action taken

  AIG contracted AIGFP-related operations and disposed of or restructured related risk exposures under government bailout and crisis restructuring.

  Aftermath

  AIGFP no longer maintained its pre-crisis business scale, and its subsequent legal entities and asset arrangements entered a complex disposal or wind-down phase.

  Source

1. 1AIG Financial Productsen.wikipedia.org
2. 2Federal Reserve Board notice concerning AIGgovinfo.gov
3. 3Financial Crisis Inquiry Commission reportgovinfo.gov