AIG loss narrows, no new bailout plan

By Lilla Zuill
Reuters
May 7, 2009


NEW YORK (Reuters) - American International Group (AIG.N), the giant insurer bailed out by the U.S. government, reported its smallest loss in six quarters on Thursday, hurt once more by investment losses and write downs.

AIG has lost more than $100 billion over those periods, largely from excessive mortgage bets taken by a financial products unit. In the fourth quarter of 2008, AIG had a loss of $61.7 billion, the largest quarterly loss in corporate history.

The first-quarter loss was $4.35 billion, equal to $1.98 per share, compared with a loss of $7.81 billion, of $3.09 a share, in the same period a year ago.

Unlike other quarterly announcements since its federal rescue last September, AIG's most recent quarter did not include a new iteration of its bailout plan.

But as in past periods, costs related to AIG Financial Products again burned a hole in the insurer's financials. The quarter included a $1.9 billion restructuring charge primarily related to its wind-down of the controversial financial products unit.

AIG warned that future quarters could include similar charges.

The insurer also recorded $2.5 billion in pretax investment losses and write-downs, and had to pony up about $1.5 billion in interest and amortization charges for a Federal Reserve credit facility.

Shareholders' equity fell to $45.8 billion at the end of the first quarter, 13 percent lower than 3 months earlier.

LOWER STRESS SCENARIO?

AIG released its results just as investors were digesting news that U.S. banks were not as strapped for cash as feared.

Citigroup analyst Joshua Shanker said optimism over the state of the banks could spread to AIG's stock on Friday.

AIG's stock rallied this week after a source familiar with AIG's financial state said it was expected to report a lower net loss in the quarter and would not need new government aid.

"Early reactions to the bank stress test results seem to be favorable, and we would expect that AIG, perceived as an option on distressed asset appreciation, may benefit," said Shanker in a research note.

AIG shares were trading one cent above their $1.95 close in post-market trading.

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