AIG Needs to Raise $12.5B after Reporting Record Loss
American International Group Inc., the world's biggest insurer by assets, reported its largest first-quarter net loss ever yesterday of $7.81 billion, compared with earnings of $4.13 billion a year earlier.
Additionally, the New York-based insurer disclosed more than $15 billion in pretax write-downs, prompting Standard & Poor's and Fitch Ratings to cut the company's credit grades.
AIG shares fell more than 7 percent after the insurer said it will raise $12.5 billion in the coming months as it looks to shore up a capital base that has been rocked by deterioration in the credit markets.
The capital raising effort will be a two-step process, with the first portion estimated to raise $7.5 billion through an offering of common stock and equity units. The equity units will consist of subordinated debt securities and contracts that require the holders to purchase AIG stock at a future date.
Once the $7.5 billion offering is completed, AIG will raise an additional $5 billion through an offering of high equity fixed-income securities. AIG, the world's biggest insurer, has yet to disclose a timetable for when it will offer the securities.
The company said it was replacing its chief financial officer, as operating income weakened across much of the company.
AIG losses were largely due to write-downs related to bad mortgage investments and credit default swaps.
Published on May 9, 2008
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