AIG posted its third consecutive quarterly net loss of more than $5 billion last night as it wrote down bad mortgage-related investments, sending its shares down almost 8 per cent.
The world's largest insurer and one of the hardest hit in the credit crisis also reported a general deterioration in its mainstream insurance businesses, which were hurt in particular by a decline in investment income and losses from its mortgage insurer, United Guaranty Corp.
AIG said its second-quarter net loss was $5.36 billion, or a loss of $2.06 a share, compared with net income of $4.28 billion, or $1.64 a share, a year ago. It had an adjusted net loss of 51 cents a share. Analysts, on average, had forecast a profit of 46 cents a share, according to Reuters Estimates.
It was the second-largest loss in AIG's 89-year history, surpassed only by the $7.7 billion net loss it recorded in the first quarter of 2008. AIG has posted net losses exceeding $18 billion over the past three quarters.
"Our second quarter results were adversely affected by the severe conditions in the housing and credit markets and a very difficult investment environment," AIG's chairman and chief executive Robert Willumstad said in a statement.
AIG said second-quarter results included pre-tax net realized capital losses of $6.08 billion ($4.02 billion after tax) arising primarily from other-than-temporary impairment charges in its investment portfolio.
The company said this compared to pre-tax net realized capital losses of $28 million ($17 million after tax) in the year-ago quarter.
General insurance operating income fell 54 per cent to $1.39 billion, reflecting a 28.3 per cent decline in investment income primarily due to lower partnership and mutual fund income, and an increase of $440 million in operating losses at United
Guaranty Corp.
The general insurance division wrote $12.22 billion in net premiums in the quarter, slightly more than last year's $12.14 billion.