AIG posts 61.7 billion dollar loss

American International Group Inc posted a $61.7 billion fourth-quarter loss -- the biggest quarterly loss in corporate history -- after
reaching a revised rescue deal with the US government that wards off for now the prospect of crippling credit rating downgrades.

The massive quarterly loss, equal to $22.95 a share, was AIG's fifth in a row, bringing the total loss over that period to more than $100 billion.

The US Treasury and Federal Reserve said AIG had posed a systemic risk requiring government action to prevent its problems from damaging the entire financial system.

AIG, the recipient of $150 billion in taxpayer aid last year, will get access to an additional $30 billion under the government's revised plan announced on Monday.

It also got more lenient terms on existing financing and will be able to significantly pay down an outstanding credit facility in a swap that will give the government a preferred-share stake in two life insurance businesses.

AIG also announced plans to spin off part of its property-casualty business, to be renamed AIU Holdings.

The revamped rescue package is the third since last fall when the government stepped in to bail out AIG, once the world's biggest insurer by market value.

The Treasury and the Fed said that AIG, which has counterparties around the globe, was so important to the US economy and financial system that it had to be helped, and they held out the possibility more aid might be needed.

"This will take time and possibly further government support if markets do not stabilize and improve," they said in a statement.

via Reuters

AIG - still in trouble ?

American International Group's deal with the government is a bankruptcy liquidation in all but name, and the $85 billion it has borrowed may not be enough extra money to pay off all its obligations, particularly in its derivatives books.

AIG had $971.7 billion of liabilities at the end of June, but a subsidiary also has about $447 billion of credit derivatives on its books. That compares with a little more than $1 trillion of assets. There is a real question mark around the credit derivatives.

The $447 billion is the amount of principal the company has protected, but how that translates to actual losses is difficult to forecast without detail about the real risk. But even if AIG does not ultimately make payouts on the credit default contracts, it could have to post more collateral and write down the derivatives as markets gyrate. Financial companies have continually underestimated their potential risk during the credit crisis, and this time may not be different.

"There is substantial risk in that credit derivatives book," said Sean Egan, co-founder of rating agency Egan-Jones Rating Co. AIG declined to comment. The government has a major role in AIG's operations now - it essentially named a new chief executive, Edward Liddy, and owns nearly 80 percent of the company's stock.

But the government is widely expected to sell off AIG's assets to get its money back, rather than aggressively pursue new business, because the United States' main priority is to get its money back, rather than to maximize profit for shareholders, experts said.

"I can't imagine they'll be in business creation mode," said Dan Alpert, a banker at Westwood Capital in New York. Customers, meanwhile, are likely to try to reduce their business with AIG. Worried clients in Singapore thronged the office of an AIG unit earlier this week to try to redeem their policies. Press reports said the same happened elsewhere in Asia, one of AIG's most important markets.

"To say that confidence has been shaken is an understatement. In the insurance business, trust is of the utmost importance," said Walter Todd, portfolio manager at Greenwood Capital Associates in Greenwood, South Carolina. In other words, AIG can't grow out of its problems, and will in fact likely be forced to shrink.

But selling off assets to meet obligations is difficult when most other financial institutions around the world are reducing the assets, depressing valuations. When it's all said and done, AIG might not have enough assets to meet its obligations, which is why the company's corporate bonds are trading at less than 50 cents on the dollar, analysts said.

"Attorneys will spend the next five years sorting through this mess," said Egan-Jones' Egan.

AIG - India Holdings List

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AIG - India Holdings

AIA Engg AIG Global Investment Corporation 1.16 218000

AIA Engg AIG Global Investment Corporation 1.26 236526

AIA Engg AIG Global Investment Corporation 1.3 245005

Bharati Shipyard AIG Trustee Company India Pvt Ltd 1.19 314145

Bharati Shipyard Aig Trustee Company India Pvt Ltd 1.14 314145

Bharati Shipyard AIG Trustee Company P Ltd - AIG India Equity Fund 1.32 314145

Federal Bank AIG Global Investment Partners LP 1 1708472

Gayatri Projects AIG Trustee Company India Pvt Ltd 1.4 141109

Gayatri Projects AIG Trustee Company India Pvt Ltd 2.07 209609

Gokaldas Exports Aig Trustee Company India Pvt Ltd 1.05 361031

Gokaldas Exports Aig Trustee Company India Pvt Ltd 1.12 385504

Indo Tech AIG Global Investment Corpn Asia 2.12 225000

Ipca Labs. AIG Trustee Company India Pvt Ltd 2 500000

Ipca Labs. AIG Trustee Company India Pvt Ltd 1.4 350000

Kolte Patil Deve AIG Trustee Company India Pvt Ltd 1.06 800000

Mindtree Ltd AIG Offshore Systems Service Inc 3.27 1240167

Mindtree Ltd AIG Offshore Systems Service Inc 3.28 1240167

Mindtree Ltd AIG Offshore Systems Service Inc 3.33 1240167

NIIT Tech. AIG Global Investment Corp 1.7 665510

NIIT Tech. AIG Global Investment Corp 2.29 1346370

NIIT Tech. AIG Global Investment Corporation 1.5 588380

Nucleus Software AIG Global Investment Corporation 1.58 509864

Sun Pharma Advan AIG Global Investment Corporation Asia Ltd 1.17 2335496

Sun Pharma Advan AIG Global Investment Corporation Asia Ltd 1.81 3650141

Sun Pharma Advan AIG Global Investment Corporation Asia Ltd 2.39 4956986

Unity Infra AIG Global Investment Corporation (ASIA) 1.05 140000