AIG shares plunge after big write-down
NEW YORK: Shares of American International Group, the worlds largest insurer, fell Friday in New York trading, a day after the company reported the biggest quarterly loss in its 89-year history.
AIG dropped $3.14, or 6.3 percent, to $47.01 in morning trading. The New York-based insurer late Thursday posted a fourth-quarter net loss of $5.29 billion, or $2.08 a share, after an $11.1 billion write-down on derivatives linked in part to subprime mortgages. The executive running the financial products unit is stepping down, the company said Friday.
“The magnitude of these losses is clearly troubling, especially as we have continued to see further deterioration in market conditions beyond the end of the year,” Nigel Dally, analyst at Morgan Stanley, said Friday in a research note.
AIG said Thursday that it expected more write-downs this year amid the worst U.S. housing slump in a quarter century. The chief executive, Martin Sullivan, said “continuing market deterioration would cause AIG to report additional unrealized market valuation losses and impairment charges.”
Joseph Cassano, who was in charge of the derivatives operation, will leave AIG effective March 31 after more than two decades at the company, Sullivan said Friday in a conference call.
The pretax write-down of $11.1 billion wiped out operating profit, which would have been $1.58 a share without the charge, Dally said. AIG also had another $3.27 billion of losses before taxes on impaired holdings in its investment portfolio.
Excluding capital losses and the change in value of some derivatives, the companys loss was $1.25 a share, missing the average expectation for 69 cents in profit among 17 analysts surveyed by Bloomberg. AIG last reported a quarterly loss in 2002, when it increased reserves for covering corporate boards and workers compensation policies.
“AIGs results in 2007 were clearly unsatisfactory,” Sullivan said in the statement.
AIG guaranteed $61.4 billion in collateralized debt obligations that included subprime mortgages as of year-end.
On Feb. 11, AIG said the derivatives, which protect investors against losses in their securities, declined by $4.88 billion in October and November, four times more than previously estimated. The companys stock had its biggest decline in two decades that day.
