The loss is not nearly as bad as the previous year's $61.7 billion fourth-quarter stumble - the biggest quarterly loss in corporate history - but at $65.51 a share, it's still much higher than analysts predicted.
Amid scrutiny, AIG in September 2008 received a $182.3 billion bailout, which gave the government an 80% stake in its business. Since then, AIG's debt pay-off funds have generally come from the sale of its non-core assets. AIG recognizes these "fire-sales" as the best way to pay back its debts while also streamlining its business.
- $2.8 billion charge on the pending sale of Hong-Kong-based Nan Shan Life Insurance Co. Ltd.
- $2.3 billion towards strengthening its commercial insurance reserves.
Despite the numbers, AIG is taking a confident position that it's doing all it can to dig out of its debt hole.
"I think it's fair to say that we made substantial progress in refocusing our businesses on growth and profitability, and we set in place the framework for repaying the U.S. taxpayers for their support of our company during its darkest days," said AIG Chief Executive Officer Robert Benmosche in a message on AIG's website.
However, AIG still owes $23.4 billion to the Federal Reserve Bank of New York, and $46.9 billion to the Treasury Department.
The financial products division also took a hit at the start of February when AIG reduced employees' bonuses by at least 10%, allowing $100 million for 200 people. The move will save around $20 million, but is still a hefty sum for employees whose actions attributed to the biggest company losses in history.
AIG sold off 41% of the portfolio in 2009, but announced last week it would halt selling and keep $500 billion of assets to take advantage of a credit market upswing and increase its investment returns.
AIG also recently dropped a plan to use cash flow from life insurance policies to pay off $8.5 billion, believing that improving markets will generate enough cash.
"While a tremendous amount of work remains to be done, and there are no guarantees in life, we believe we are on our way to regaining our stature as one of the world's largest and most successful property/casualty insurance operations," said Benmosche.
Investors did not share AIG's confidence, and shares were down 9% mid-afternoon Friday.
"While there are a few shafts of encouraging light, results overall were murkier and messier than the market overall expected," Nomura Securities analyst David Havens told The Wall Street Journal.
Worse, the insurer has indicated that it may need even more federal assistance.
"Should certain of these risks emerge, AIG may need additional support from the U.S. government," the company said in its annual 10-K filing, referring to risks associated with poor market performance.
News and Related Story Links:
AIG loses $8.5bn in fourth quarter
The Wall Street Journal:
AIG 4Q Loss Narrows After 2008 Record