World’s Largest Insurer Reports Big Loss For First Quarter
American International Group Inc. reported a $7.81 billion loss for the first quarter in a earnings report released after the market closed on Thursday. While AIG’s core insurance business is doing reasonably well, the mounting losses are stemming from it’s high risk exposure to the slumping housing market.
For the second quarter in a row, the company has had to write-down the value of it’s credit default swap contracts and mortgage backed securities portfolio. The company reported another $15 billion in pre-tax write-downs after taking $11 billion in write-downs last quarter.
The company also announced plans to raise $12.5 billion in additional capital through the sale of stock and the issuance of fixed income bonds. These efforts will be hampered somewhat due to the fact it’s stock value took a big hit Friday, as well as the fact that ratings agencies downgraded the company’s credit rating, which will make borrowing more expensive.
A number of analysts have revised AIG’s earnings estimates downwards for the rest of the year as they expect the company’s misfortunes to continue until the housing market can rebound. Earlier this week the SEC also announced that financial institutions must become more transparent with their bookkeeping.
As the many woefully inaccurate earnings estimates have proven, it has been difficult for analysts and regulators alike to put a value and asses risk on the complex securities and financial products these companies deal in.
May 23rd, 2008 at 4:54 pm
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June 6th, 2008 at 11:28 pm
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