AIG loses $61.7B US, gets reworked bailout

American International Group Inc., once the world's largest insurer, said Monday it lost $61.7 billion US in the fourth quarter, the biggest quarterly loss in U.S. corporate history.

The results come as the U.S. government also Monday announced a restructuring of a bailout plan for the troubled insurer, extending $30 billion in additional aid to the company.

New York-based AIG said it lost $22.95 per share in the last three months of 2008. It lost $5.3 billion, or $2.08 per share, in the quarter a year ago.

The latest results include $7.2 billion in unrealized losses and credit valuation adjustments at AIG Financial Products, the source of credit-default swaps, and pretax losses of $21.6 billion tied to the declining value of AIG's investment portfolio.

AIG's general insurance business swung to a loss on $2.8 billion in net realized capital losses. General insurance net premiums dropped 16.3 percent to $9.2 billion, and net premiums earned fell 5.9 percent to nearly $11 billion.

Adjusted to exclude certain items, operating losses totalled $37.9 billion, or $14.17 per share, versus a loss of $3.2 billion, or $1.25 per share, last year.

Analysts had underestimated losses

The results drastically fell short of estimates. Analysts surveyed by Thomson Reuters had, on average, forecast a loss estimate of 37 cents per share on revenue of $24.82 billion. Analysts have been dropping coverage of AIG in recent weeks due to the uncertainty of the firm's future.

"We have made meaningful progress in addressing liquidity issues related to AIG Financial Products and our securities lending activities and have announced several divestitures," said AIG president and chief executive Edward Liddy in a statement. "However, the economy and capital markets remain in turmoil and we are taking additional steps to preserve the value of our businesses and maximize the ultimate proceeds for the benefit of all stakeholders, including taxpayers."

The government's new financial assistance to AIG includes providing the troubled company another $30 billion on an "as needed" basis. The Federal Reserve will also take stakes in two international units.

Instead of paying back $38 billion in cash with interest that it has used from a Federal Reserve credit line, AIG now will repay that amount with equity stakes in Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries.

It marked the fourth time the government has stepped in to help AIG. Its initial lifeline came in September. The action was announced jointly early Monday by the Treasury Department and the Federal Reserve.