Four years ago the insurance industry was rocked by the news that the world’s largest and best-known insurer, American International Group (AIG), was set to lose its AA credit rating due to massive exposures to mortgage-related debt in its non-insurance subsidiaries.

The potential downgrade triggered a range of counterparty economic measures that would bring the company to the brink of collapse.

Its share price imploded, and it appeared the giant insurer with operations in 130 countries was set to follow banks such as Lehman Brothers into bankruptcy.

But that was before the US Government stepped in, with a massive $US85 billion ($82.8 billion) rescue package in exchange for US taxpayers taking a 79.9% stake in the company.

That figure blew out to $US182.3 billion ($177.6 billion) as the Government struggled with the realisation that a company which insured so many public buildings, schools and other public infrastructure, as well as millions of homes and businesses, couldn’t be allowed to simply fail.

As the Australian Government had already found in 2001 when HIH collapsed owing creditors $5.3 billion, insurance company collapses are messy affairs with repercussions that drag on for years.

Restructuring and a sell-off of assets ensued as AIG’s beleaguered management attempted to pay back the US Government loan and ensure the ongoing survival of the company.

Its Australian arm found itself caught between a rock and a hard place, with local media concentrating on the developing saga in New York and ignoring the fact that AIG Australia was separately capitalised under solvency requirements imposed by the Australian Prudential Regulation Authority (APRA) – one of the toughest financial regulators in the world.

Seeking to avoid a mass exodus of clients – the insurance equivalent of a run on the bank – AIG Australia launched an industry campaign to assure brokers and their clients.

By ignoring the big story and concentrating on the local issues, the strategy worked. Australian brokers and their clients stuck with AIG, with the company boasting a client retention figure of 90% during the period.

In the US, the company has repaid the US Government’s support by turning around its business and in recent weeks completing its financial resurrection.

By September 14, almost four years to the day since its near-collapse, AIG announced that through debt repayments and the income generated by a systematic selldown of the US Government’s shareholding, it had returned $US194.7 billion ($189.7 billion) to US taxpayers, for a profit to date of more than $US15 billion ($14.6 billion).

The US Government now owns just 15.9% of AIG, and based on the current share price will generate a further profit of around $US8 billion ($7.8 billion) when it sells off that final stake next year.

Governments aren’t usually financially rewarded for investing in struggling companies – the Australian Government’s support of the auto industry is a case in point – but the US public servants who persuaded politicians that AIG had to be saved can now regard themselves as handsomely vindicated.

“Everyone at AIG is deeply proud that we kept our promise to make America whole plus a profit,” AIG President and CEO Robert Benmosche said. “Once again we thank America for the opportunity to prove that we would do the right thing with their money.

“Every day, we are working to build on that accomplishment by continuing to innovate, while providing our clients with outstanding products and services.”

AIG is also working to put into place the final remaining piece in its repatriation puzzle – the reclaiming of its once-tarnished brand, which Chartis Australia CEO Noel Condon says marks the point at which the US Government ceased its majority ownership of the insurer.

Once described as “damaged beyond repair”, the AIG brand is now once again regarded as a “powerful asset”. The Chartis brand – which was adopted by all AIG’s general insurance operations around the world – is set to be retired.

Mr Condon told insuranceNEWS.com.au the rebranding is being referred to within AIG as “independence day”.

Considering that for a time the AIG logo was even removed from employees’ ID badges for fear of retribution against them from vigilante taxpayers angry about the bailout, the return of that iconic brand – and the makeover is very light – is a symbolic moment in the company’s rapid road back from the brink of ruin.