AIG may report largest ever quarterly loss in corporate history

24 February 2009

American International Group (AIG), rescued twice last year by the US government, is asking for more aid and bracing for a fourth-quarter loss of roughly $60 billion, a source familiar with the matter said. It would be the biggest loss in a quarter in corporate history.

The $60-billion would exceed Time Warner's $54-billion single-quarter loss in 2002 and dwarf the $24.5-billion loss AIG posted in the third quarter, when the government increased its rescue package for the insurer to about $150 billion.

The latest round of talks with the government include the possibility of additional funds for the insurer and trading debt for equity, another source said on Monday. The situation is fluid and other options are being discussed, this second source said, adding that it was unclear where the talks would lead.

AIG may convert the government's preferred shares into common stock to reduce pressure on the company's cash flow. New York- based AIG pays a 10 per cent dividend on preferred stock, and none on common shares. Executives at Citigroup Inc., previously the largest bank, also have discussed a share conversion as a way to quell capital-adequacy concerns.

CNBC, which first reported AIG's discussions, said the losses to be announced next Monday were due to write-downs on commercial real estate and other assets. It said the insurer's board would meet next Sunday to work out an agreement with the government. In case they do not reach a deal, AIG's lawyers at Weil, Gotshal & Manges LLP were preparing for the possibility of bankruptcy, CNBC said.

AIG said in a statement it had not yet reported results and would provide an update when it does so in the near future. "We continue to work with the US government to evaluate potential new alternatives for addressing AIG's financial challenges," AIG said.