DOW JONES NEWSWIRES
American International Group Inc.'s (AIG) first-quarter loss
narrowed to $4.35 billion, paling in comparison to the record $61.7
billion loss the insurance giant posted for the fourth quarter,
though it still saw hefty write-downs and charges tied to its
investment portfolio.
Shares dropped 6.2% to $1.83 in after-hours trading. AIG's stock
has more than quadrupled since March when the government overhauled
the bailout and the stock market began its current rally.
Despite a federal commitment of more than $170 billion in aid,
AIG's core insurance businesses continue to struggle amid the
economic and capital-market turmoil.
Looking to preserve their value, AIG is forming a general
insurance holding company to house its commercial insurance group
and other property-and-casualty operations and selling some smaller
assets. That move will free the new company from AIG's debt and bad
investments and help retain key employees and customers. One risk
is that AIG's franchises could lose value before the company can
sell them to help repay taxpayers.
For the first quarter, AIG - which is 80% owned by the U.S.
government - posted a loss of $4.35 billion, or $1.98 a share,
compared with a year-earlier loss of $7.81 billion, or $3.09 a
share. Excluding capital losses, the red ink amounted to $1.6
billion, down from $3.56 billion.
The latest results included $1.9 billion in charges tied to the
wind down of the financial products group, the source of the
insurer's plagued credit default swaps, and $2.5 billion in
investment losses.
Operationally, operating income at AIG's general-insurance
business drop by 72% amid investment losses, while
general-insurance net premiums declined 18%.
Meanwhile, life-insurance and retirement-services profits
dropped to $1.2 billion amid lower assets under management and
losses on partnership investments.
The U.S. government in September rescued AIG after the tumbling
value of its collateralized debt obligations pushed it to the brink
of bankruptcy, and the government has since expanded its support.
When it revised the bailout in March, AIG gained access to about
$30 billion under the Troubled Asset Relief Program. It hasn't
touched that money yet but could use it to help plug holes.
-By Lauren Pollock, Dow Jones Newswires; 201-938-5964;
lauren.pollock@dowjones.com