American International Group today reported a loss of $61.7 billion for the fourth quarter of 2008--one of the largest ever recorded by a public company. At the same time, in coordination with the U.S. Treasury and Federal Reserve Board, AIG announced a restructuring both of its businesses and aid program from the federal government as it struggles to maintain its credit ratings and remain a viable company.

AIG held a conference call for the investment community to discuss these developments this morning at 8:30 a.m. EST, broadcast live on the Internet at www.aigwebcast.com. A replay will be archived at the same URL through Friday, March 20, 2009. (NU Online News Service will report on the call later this morning.)

For full-year 2008, the net loss was $99.3 billion, compared to net income of $6.2 billion in 2007, the company noted in a statement released today at 6 a.m. EST.

The full-year 2008 adjusted net loss was $52.1 billion, or $19.91 per diluted share, compared to adjusted net income of $9.3 billion, or $3.58 per diluted share for full-year 2007.

As for AIG's latest restructuring moves, there will be a transfer of equity stakes in two overseas units--Asia-based American International Assurance Company and American Life Insurance Company (ALICO)--to the federal government in return for forgiveness of the $40 billion debt it owes to Uncle Sam. A recent auction to try to sell ALICO--which does business in 50 countries--failed to win any bidders.

AIG will continue to operate the two companies, and eventually could sell or take them public, sources told NU.

AIG also said it would form a general insurance holding company that will include its Commercial Insurance Group, Foreign General unit and other property-casualty operations. The new unit will be called AIU Holdings Inc., with a management and brand "distinct from AIG," the company said.

This was designed to prepare for the potential sale of a minority stake in the business--believed to be 19.9 percent--to the public, hopefully within a year as market conditions improve.

Additionally, the U.S. Treasury and the Federal Reserve will have a facility providing $30 billion in fresh capital to the insurer through the Treasury's Capital Purchase Program. It also will lower the interest rate on a $60 billion loan, and ease the terms of a $40 billion preferred share investment, the company reported.

AIG will securitize $5 billion to $10 billion in debt, backed with life insurance assets, to further reduce its debt burden. In addition, the $60 billion Federal Reserve credit facility AIG received in November will be reduced to $25 billion, the company said.

An AIG official noted that the $30 billion in additional funds will be a standby facility--"a commitment, not actual cash."

On its earnings, AIG cited "continued severe credit market deterioration" and charges related to ongoing restructuring activities for its fourth-quarter loss of $61.7 billion, or $22.95 per diluted share, compared to a 2007 fourth quarter net loss of $5.3 billion, or $2.08 per diluted share.

Most of AIG's losses, however, were related to writedowns--particularly from its holdings of commercial mortgage-backed securities, not cash losses.

The company said that insurance premiums and other considerations declined only modestly, down by 1.9 percent for the fourth quarter, compared to the same period in 2007. For the year, premiums and other considerations grew by 5.3 percent, AIG officials said.

AIG Chairman and Chief Executive Officer Edward Liddy defended the company's ongoing viability despite these latest earnings reports.

"We have made meaningful progress in addressing liquidity issues related to [AIG Financial Products] and our securities lending activities, and have announced several divestitures," he said.

He cautioned, 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."

Special Reports /

AIG Reports $61.7B Q4 Loss; Gets More Federal Aid

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