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AIG Lays an E-G-G

Shares of AIG will be on sale in the lobby at discounted prices for all you Sovereign Wealth Funds (SWF) during NYSE intermission this evening.

See the CFO for special Volume Pricing.

AP
AIG posts 1Q loss of $7.8B, plans to raise $12.5B in capital
Thursday May 8, 5:32 pm ET
By Stephen Bernard, AP Business Writer

AIG loses $7.8 billion in 1st quarter on credit default swap and investment portfolio losses

NEW YORK (AP) -- American International Group Inc. said Thursday that it swung to a first-quarter loss of $7.81 billion because of losses tied to credit swaps and mortgage-related operations and that it plans to raise a total of $12.5 billion in new cash to shore up its capital base.

AIG, the world's biggest insurer, will raise $7.5 billion through an offering of common stock as well as equity units. The equity units will consist of subordinated debt securities and contracts that require the holders to purchase AIG stock at a future date.

An additional $5 billion will be raised through the offering of fixed-income securities at a later date.

No pricing for the offerings was disclosed.

AIG lost $7.81 billion, or $3.09 per share, during the quarter ended March 31, compared with earnings of $1.58 per share, or $4.13 billion, during the year-ago period.

Analysts surveyed by Thomson Financial, on average, forecast a loss of 76 cents per share.

Like so many other financial services firms, AIG has been hit hard by deterioration in the credit markets. As defaults sharply increased on mortgages beginning in the middle of 2007, investors shied away from purchasing all but the safest debt. Because of the illiquidity in the credit markets the value of risky debt has plummeted, forcing firms like AIG to reduce the value of their investments in products such as credit default swaps and mortgage-backed securities.

"While we anticipated a difficult trading environment, the severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations," Martin Sullivan, AIG's president and chief executive, said in a statement.

New York-based AIG lost $9.11 billion in its credit-default swaps portfolio during the first quarter. The swaps promise to cover losses on $579 billion in bonds or other kinds of debt. AIG recorded an $11.12 billion loss on the swaps portfolio during the final quarter of 2007.

Losses in its investment portfolio, which includes debt backed by troubled mortgages, totaled $6.09 billion. It booked a $3 billion loss on the portfolio a quarter earlier.

Much of the charges in the investment portfolio were tied to losses on mortgage-backed securities -- investment instruments backed by pools of residential mortgages or other residential loans.

AIG says it lost $352 million in its mortgage insurance business, United Guaranty. The losses were mostly tied to increased claims incurred on both first- and second-lien businesses. Premiums written in the division did increase 14 percent from the year-ago period, but were unable to offset the spike in claims.

Overall, the insurance writing business at AIG was relatively flat compared with the first quarter last year.

Net premiums written fell less than 1 percent during the first quarter to $12.08 billion. AIG's net premiums written totaled $12.11 billion during the same quarter last year.

AIG's combined ratio increased to 96.86 during the first quarter, compared with 87.52 during the year-ago period.

Combined ratio measures the amount of money an insurer receives from writing premiums compared to how much it spends on claims and other expenses. A ratio above 100 means the insurer is spending more than it earns.

Separately, the board of directors approved a 2-cent per share, or 10 percent, boost to its quarterly cash dividend, to 22 cents. The dividend will be paid Sept. 19 to shareholders of record on Sept. 5. (We hear they terminated the stock buyback program immediately though LOL - Jesse)

The company also appointed Steven Bensinger vice chairman of financial services. He previously served as executive vice president and chief financial officer at AIG. He will continue in his current role until a replacement can be found, the company said.

Shares of AIG tumbled $2.70, or 6.1 percent in after hours trading to $41.45, after closing at $44.15 in the regular session.

Wall Street Gags on SEC Ruling for Investment Bank Capital Disclosures

SEC to Make Wall Street Banks Reveal Capital, Liquidity Levels
By Jesse Westbrook

May 7 (Bloomberg) -- The U.S. Securities and Exchange Commission will require Wall Street investment banks to disclose their capital and liquidity levels, after speculation about a cash shortage at Bear Stearns Cos. triggered a run on the firm, SEC Chairman Christopher Cox said.

The disclosures will be ``in terms that the market can readily understand and digest,'' Cox said today during a speech in Washington. The SEC will require the disclosures ``later this year,'' he said.

To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.

Last Updated: May 7, 2008 14:05 EDT