AIG Loses $24.5B, Gets More Money From Government

American International Group Inc., New York lost $24.5 billion ($9.05 per share) for the third quarter. This included a $7.05 billion pre-tax charge related to AIG Financial Products Corp.'s super senior credit default swap portfolio and a pre-tax net loss of $1.09 billion for a credit valuation adjustment on AIGFP's assets and liabilities. There was also a pre-tax net realized capital loss of $18.31 billion on AIG's investment portfolio. The company's private mortgage insurance subsidiary, United Guaranty Corp., had operating losses of $901 million for the quarter. This loss included the establishment of a premium deficiency reserve for its second-lien business. AIG also announced it has entered into agreements with the U.S. Treasury and the Federal Reserve to obtain more capital. The company will receive $40 billion through the Troubled Assets Resolution Program by issuing the Treasury preferred stock. These funds will be used to pay down a portion of the Federal Reserve Bank of New York credit line. The credit line will be reduced to $60 billion, at a lower interest rate, lower fees and be extended to a five year maturity to give AIG the opportunity to conduct planned asset sales in an orderly manner. AIG will transfer residential mortgage-backed securities into a new entity capitalized subordinated funding of $1 billion from AIG and senior funding of up to $22.5 billion from FRBNY. A second entity funded with $5 billion from AIG and up to $30 billion from FRBNY will purchase $70 billion in credit-default swaps.