Business | Investment
AIG plans to raise $12.5b after two straight quarterly losses
American International Group (AIG), the world's biggest insurer by assets, said it needs to raise $12.5 billion after two straight quarterly losses as pressure builds on chief executive officer Martin Sullivan.
- Bloomberg
- Published: 23:56 May 9, 2008
New York: American International Group (AIG), the world's biggest insurer by assets, said it needs to raise $12.5 billion after two straight quarterly losses as pressure builds on chief executive officer Martin Sullivan.
AIG fell 8.3 per cent to $40.50 in early trading at 7.27am in New York after the company reported a first-quarter net loss Thursday of $7.81 billion, compared with earnings of $4.13 billion a year earlier.
The New York-based insurer disclosed more than $15 billion in pretax writedowns, prompting Standard & Poor's and Fitch Ratings to cut the company's credit grades.
"Management capability issues, which have been smoldering for awhile, are likely to flare up," said David Havens, a credit analyst at UBS AG in Stamford, Connecticut, in a note to investors on Friday. "One of AIG's constant weaknesses has been its complexity. It's come back to bite them."
Suffering
Shareholders are suffering, with AIG down 24 per cent this year. The decline came after Sullivan, 53, reassured investors in December that writedowns would be "manageable".
The insurer has since reported more than $19 billion in losses from contracts sold to protect fixed-income investors and said more are possible, causing analysts to question how much longer Sullivan's three-year tenure as CEO will last.
AIG wrote down contracts it had sold to protect investors by $9.11 billion in the first quarter to comply with rules that require the company to estimate their present market value.
Sullivan said as recently as March that those losses were temporary, and the actual amount in a worst-case scenario might be $900 million over a period of years. On Wednesday, AIG said the losses might reach $2.4 billion.
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