AIG known as the American Insurance Group faced one of its worst times in its history during the financial crisis of 2008. On date 16th September 2008 it received a bailout from the US government amounting to $85 billion. Post this bailout the US government became 80% shareholder in the firm. This bailout was given to prevent the bankruptcy of AIG which could have triggered many other bankruptcies of the financial entities in US.
Prior to the crisis AIG used to be one of the world’s largest insurers in terms of volume. However after the subprime crisis it was struggling to keep up and was on the verge of bankruptcy. If the US government had not intervened and provided the bailout money AIG would have defaulted on its payments and would have been declared as bankrupt. This could have been catastrophic as default of such large insurance firm could have caused panic in the financial world. Financial markets were already reeling under the pressure due to default from Lehman Brothers. If AIG was also declared as bankrupt then the government could be facing severe depression. Thus AIG was given bailout money in return for 80% of equity of the firm.