That write-down came on derivatives linked in part to sub-prime mortgages that the New York firm said fell in value by $11.12 billion, pretax, in the fourth quarter. It left open the possibility that actual losses on the portfolio could be "material" in some future reporting period.
The write-down wasn't the only mortgage-market related blow to the firm. In addition, AIG said it recorded a $2.63 billion capital loss largely because of charges in its general investment portfolio, as well as a $643 million charge related to investments held by its financial products unit.
Those charges, AIG said, stemmed "primarily from the significant, rapid declines in market values" of mortgage-backed securities in the quarter "for which AIG cannot reasonably determine that the recovery period will be temporary."
The results represented a significant setback for the firm, which had earned $3.44 billion in the same period last year, and indicate that the road ahead could be fraught with peril given ongoing problems in the housing and credit markets.
For the entire year, AIG recorded net income of $6.2 billion, a nearly 56% drop from the $14.05 billion it earned in 2006. AIG's chief executive, Martin Sullivan, called the results for the year "clearly unsatisfactory," in a statement.
"During 2008, we expect the U.S. housing market to remain weak and credit market uncertainty will likely persist. Continuing market deterioration would cause AIG to report additional unrealized market valuation losses and impairment charges," Mr. Sullivan said.