A.I.G. Lets Out Some Steam

The great fire sale of American International Group has begun.

Edward Liddy, the chief executive of A.I.G. said on CNBC this morning that he plans to sell about 70 percent of the company's assets in order to break free from the government's teat. He said that the company "would like to" pay back a $60 billion federal loan next year.

The first step came today with the sale of Hartford Steam Boilers to Munich Re for $742 million in cash. That is quite a discount to the $1.2 billion that A.I.G. paid for the business in 2000, shelling out $41 worth of A.I.G. stock for every share of Hartford's parent.

A haircut of some sort is not that surprising: the stock deal came before the tech-bust market crash, and any sale today was going to be a challenge with financing so hard to obtain. (Munich Re is financing the acquisition with its internal resources.) But if A.I.G. is going to take a third off every business it sells, it's going to a take a lot longer to pay off the government.

One hopes that those Hartford Steam shareholders sold their A.I.G. shares long ago. A.I.G.'s stock price has plunged 97 percent this year.

A.I.G. still has a chance to reinvent itself. The unit that is selling, started as a company that reinvented an entire industry.

The industrialization of the United States was powered by steam, but steam was a dangerous, little understood force.

Exploding boilers were simply chalked up as the price for economic growth. During the 1850's, boiler explosions occurred at the rate of nearly one every four days.

"People who ran industrial concerns simply assumed that their boilers would explode and they would lose one or two other workers," Hartford Steam Boiler explains on its website.

But others argued that better materials and designs and regular inspections would prevent explosions. That led to the founding of he Hartford Steam Boiler Inspection and Insurance Company was founded in 1866. Today, the company helps insure factories and power plants.