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Declining condition of American International Group Inc.

2008-08-07 16:59:34 (GMT) (Caymanmama.com - Business News)

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Sacramento, California (CaymanMama.com) — American International Group Inc. has posted its straight quarterly loss for the third quarter which has come as a rude awakening for its investors who were hoping that the troubled insurer’s mortgage investments market had begun to level off. AIG shares fell nearly 8% in after-hours trading.

The largest insurer of the world had suffered from a deficit worth $5.36 million during the 2nd quarter as it lost $5.56 billion before taxes. Credit default swap is an insurance policy, which protects the bondholders against the defaults. Over the last three quarters, AIG has faced a loss of over $25 billion before taxes to these policies and over $15 billion before tax in other types of investments.

The financial institutions, which bet on risky securities backed by mortgage, have pummelled from the beginning of the credit crisis. When mortgages began to fail, investment values plunged which forced companies such as AIG to mark down their holdings value heavily. The abandonment of credit markets by investors last year led to a decrease in the value of debt securities and continuing waves of foreclosure properties this year extended the loss at the financial companies. Some analysts judge that AIG is going to witness more losses in the coming year.

Byron MacLeod from Gradient Analytics said that things are continuing to deteriorate for the company assets. It lost around $5.36 billion during the period of April to June or $2.06 for every share. During the same time last year, it had earned around $4.28 billion, or $1.64 for every share.

If we exclude the one-time items, loss for every share comes to 51 cents which is much worse than the 63% gain anticipated by the analysts. The general insurance segment of the AIG saw a decline of 54.3% in the operating income and its retirement and life insurance services division witnessed a 10% decline. The asset management unit of the company also faced a decline of income.



tariqdossal · Filed Under Business 

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