Shares in American International Group plunged after the company said it could offer “no assurance” that its huge credit market losses would come to an end any time soon, Financial Times reports.
After the market closed on Thursday, AIG reported a net loss of $7.8bn after it revealed $15bn in credit-related writedowns and said it would raise $12bn in fresh capital to bolster its balance sheet. The insurer also said it would move Steve Bensinger, chief financial officer, to another job and begin a search for a new CFO.
Martin Sullivan, AIG’s embattled chief executive, says the insurer harboured “no illusions” about the challenges ahead. “Many of our businesses, while largely affected by external factors, fell short of our own high expectations,” he says.
Sullivan, who is facing growing pressure after two disastrous unprofitable quarters, also defended AIG’s decision to raise its dividend by 10% to 22 cents a share even in the face of massive losses. He says the dividend increase reflected the insurer’s underlying strength.
Including almost $15bn in fourth-quarter losses and writedowns, the credit crisis has cost AIG more than $30bn.
AIG shares fell 8.5% in afternoon trade to $40.40. The shares are off 44% since late June when the credit crisis took hold.
AIG’s first quarter loss, which compared to a profit of $4.13bn last year, included a writedown of $9.11bn on its credit default swap portfolio. The results also included writedowns of $6.09bn on the value of mortgage-related securities and other structured products on the balance sheet.