AIG Shares Fall On Fears More Government Cash Needed

by Lilla Zuill
Reuters
February 3, 2009


NEW YORK (Reuters) - Investors concerns that American International Group (AIG.N) could need more cash than the $150 billion taxpayer bailout it received last year sent its shares as low as 16 percent on Tuesday to an all-time low.

"People are getting nervous with companies that received money from the government ... concerned about whether money will be available for these troubled companies," said William Lefkowitz, an options strategist at brokerage firm vFinance Investments in New York.

"As a result of this thinking, AIG is trading down today," Lefkowitz said.

AIG's Chief Executive Edward Liddy has said he hoped the government's $150 billion rescue package would be adequate, but he did not rule out seeking more government money.

AIG's bailout swelled to $150 billion last November when the government stepped in for the second time to buy toxic mortgage assets.

Last week, AIG's chief restructuring officer Paula Reynolds told the Wall Street Journal the insurer was in discussions with the government to backstop some of its troubled assets, akin to a federal deal reached with Citigroup.

In afternoon trading, AIG shares were down 15.45 percent to $1.04, and Citigroup (C.N) and Bank of America (BAC.N), which have also received government funds, were down 5.21 percent to $3.46 and 11.17 percent to $5.33, respectively.

AIG investors were heavily diluted when the government took an 80 percent stake in the insurer at the time of its bailout. Investors stand to lose more if companies are nationalized.

Many large shareholders have cut their exposure to AIG since the government bailout, according to Reuters data.

Fidelity Management and Research reduced its holding of AIG stock by 65 percent, or 103 million shares, in the period ended September 30. T. Rowe Price Associates cut its exposure by more than half, selling 13 million shares in the same period.

Shares of AIG, which traded at $55.96 a year ago, fell as low as $1.01 on the New York Stock Exchange on Tuesday. They were down 15.45 percent at $1.04 in afternoon trade.

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