How does good cash cow from Asia save life of AIG ?

      Cash flows not only show whether the firm will be able to pay suppliers, wages, or other high priority expenses (e.g., rent, or bank interest), but also demonstrate a clear picture of a firm’s power or ability to repay loans (for lender’ view) and whether the firm is financially sound and good (for investor’ view). Financial Times in London on February 12, 2009, reported that even AIG (now 80% owned by the U.S. government) generates about $10 billion of cash flow per year (from commercial property and casualty business as well as its Asian life insurance—life policies mainly come from Hong Kong, Taiwan, and Japan), and assume half of them are utilized to pay down debts and the firm would owe for about $70 billion of debt in five years (Financial Times, 2009). Because of AIG gets into the right markets and sells the right policies, and gets high cash flows, this is why it can hold on and keep the company running.

Reference

Financial Times. (2009, February 12). AIG against the wall.Retrieved on February 28, 2009, from ProQuest Database.