AIG loss exceeds target as reserves raised, debt paid

New York: American International Group posted a wider-than-expected loss on Friday after setting aside more reserves for insurance claims and paying down bailout debts. The company's shares fell 10 per cent in New York trading.

The fourth-quarter net loss of $8.87 billion (Dh32.57 billion), or $65.51 a share, narrowed from $61.7 billion, or $458.99, a year earlier when AIG recorded the biggest loss in US corporate history, the New York-based firm said Friday.

Results included $6.7 billion in charges fuelled by paying down AIG's Federal Reserve credit line. It cost AIG $1.8 billion to add to property-casualty reserves as sales in the division slipped 2.2 per cent.

"It was a messy quarter, and overall it shows you how deep a hole they've dug, and how hard it is for them to dig out," said Bill Bergman, an analyst at Morningstar in Chicago. "The reserve boost is a little red flag, as the industry is seeing largely favourable trends in reserve development."

Chief executive officer Robert Benmosche, 65, appointed in August, must increase insurance profits to repay loans in AIG's $182.3-billion bailout.

Benmosche, who has told staff that AIG was "too big", is also divesting two of the company's largest non-US life insurance divisions to reduce the firm's draw on a Federal Reserve credit line by $25 billion.

Shares decline

The operating loss, which excludes some investment results, was $53.23 a share, missing the $3.94 average loss estimate of three analysts surveyed by Bloomberg.

The insurer declined $2.74 to $24.77 at 4.02pm in New York Stock Exchange composite trading. AIG has slipped about 17 per cent this year. The company plunged 97 per cent in 2008, the year it almost collapsed, and 4.5 per cent last year.

Shareholders' equity, a measure of assets minus liabilities, fell 4 per cent to $69.8 billion from $72.7 billion as of September 30. Unrealised gains on bonds available for sale were $1.06 billion, compared with $143 million as of September 30. Gross unrealised losses narrowed for residential mortgage-backed securities and widened for municipal bonds. The figures, monitored by investors and rating firms, reflect market fluctuations that aren't counted toward earnings.

AIG's annual loss narrowed to $10.9 billion for 2009 from $99.3 billion in 2008. The insurer earned $6.2 billion in 2007.

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