Insurer AIG reports $5.4bn loss07 Aug 2008 • by Natalie Aster
American International Group (AIG) has reported a another quarterly loss as profits were wiped out by writedowns on mortgage-related investments.
For the April to June period, the world's biggest insurer incurred a net loss of $5.36bn (£2.75bn) compared with a profit of $4.28bn a year ago.
AIG sacked chief executive Martin Sullivan in June and replaced him with ex-Citigroup banker Robert Willumstad.
Mr Willumstad blamed the poor housing and credit markets for AIG's troubles.
One of the main factors behind the loss was a pre-tax charge of $5.56bn that AIG took on the value of contracts sold to protect bond investors against losses.
It also took a $6.08bn hit on its portfolio of residential mortgage-backed securities due to "the severe, rapid declines" in their market value.
Mr Willumstad said: "We are conducting a comprehensive review of all AIG's businesses with the objectives of improving results, reducing AIG's risk profile and protecting our capital base."
He said a progress report would be released in September.
AIG shares dropped almost 8% in after-hours trade in New York on Wednesday, suggesting they could fall when the market opens on Thursday. AIG's share price has fallen by half since the start of the year.
But analysts considered that AIG's prospects could improve as market conditions picked up.
"It looks like the new CEO took what I call a kitchen sink quarter," Keith Wirtz, president and chief investment officer of Fifth Third Asset Management said, suggesting he was aiming to clear all the bad news at once.