AIG’s Q1 income hit by weak US housing market and credit market

American International Group Inc. (AIG) incurred a net loss of US$7.81 billion for 2008 Q1, a dramatic decrease from 2007 Q1’s net income of US$4.13 billion.
The company attributes the loss to the continuation of the weak U.S. housing market, the disruption in the credit markets, as well as equity market volatility.
AIG’s general insurance operations saw a 71.3% decline in its underwriting profit, from US$1.412 billion in 2007 Q1, to US$405 million in 2008 Q1, a company statement says.
The loss ratio for this unit of business climbed from 64.18 to 70.43, quarter over quarter. The combined ratio also climbed from 87.52 in 2007 Q1 to 96.86 in 2008 Q1.
In a statement, AIG emphasized that despite the difficult environment and its resulting effect on AIG’s overall financial performance for the first quarter, “core insurance business continue to perform satisfactorily.”
The company also announced a plan to raise approximately US$12.5 billion in capital to fortify its balance sheet and provide increased financial flexibility.
The capital is to be raised through a common stock offering and an equity-linked offering for an aggregate of approximately US$7.5 billion, a release says.
“These offerings are designed to further strengthen AIG’s significant financial resources and will enhance its ability to grow while maintaining the strength to withstand potential short-term market volatility.”