Sub-prime credit crunch and homes on sale
hits second line. American International Group
AIG has to write down $ 5.4 bn relate to
One of the main factors behind the loss was a pre-tax charge of $5.56bn that AIG took on the value of contracts sold to protect bond investors against losses.
It also took a $6.08bn hit on its portfolio of residential mortgage-backed securities due to "the severe, rapid declines" in their market value. Mr Willumstad said: "We are conducting a comprehensive review of all AIG's businesses with the objectives of improving results, reducing AIG's risk profile and protecting our capital base." He said a progress report would be released in September.
AIG shares dropped almost 8% in after-hours trade in New York on Wednesday, suggesting they could fall when the market opens on Thursday. AIG's share price has fallen by half since the start of the year. But analysts considered that AIG's prospects could improve as market conditions picked up.
"It looks like the new CEO took what I call a kitchen sink quarter," Keith Wirtz, president and chief investment officer of Fifth Third Asset Management said, suggesting he was aiming to clear all the bad news at once.