10-QPeriod: Q3 FY2008

AMERICAN INTERNATIONAL GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 10, 2008For Securities:AIG

Summary

In the third quarter of 2008, American International Group, Inc. (AIG) reported a substantial net loss of $24.5 billion, or $9.05 per diluted share, primarily driven by significant realized capital losses of $18.3 billion and unrealized market valuation losses of $7.1 billion related to its AIG Financial Products (AIGFP) segment's super senior credit default swap portfolio. This quarter marked a critical period for AIG, heavily impacted by the ongoing financial crisis, which led to rating agency downgrades and severe liquidity pressures. Despite the overall loss, AIG secured an $85 billion revolving credit facility from the Federal Reserve Bank of New York (Fed Facility) on September 22, 2008, totaling $63 billion in outstanding borrowings at the end of the quarter. The company is actively pursuing asset disposals and restructuring plans to stabilize its operations and repay the Fed Facility, including a significant preferred equity investment from the U.S. Treasury. Management believes these measures will provide adequate liquidity for the next twelve months, though significant risks remain.

Financial Highlights

18 data points
Beta

Revenue

$898.00M

Net Income

-$24.47B

-2724.7% Net Margin

EPS (Diluted)

$-181.02

Cash & Equivalents

$18.57B

Free Cash Flow

-$15.24B

Financial Statements
Beta
Revenue$898.00M
SG&A Expenses$6.78B
Interest Expense$2.30B
Net Income-$24.47B
EPS (Basic)$-181.02
EPS (Diluted)$-181.02
Shares Outstanding (Basic)135.17M
Shares Outstanding (Diluted)135.17M

Key Highlights

  • 1AIG reported a net loss of $24.47 billion for the three months ended September 30, 2008, compared to a net income of $3.09 billion in the prior year's period.
  • 2Net investment income declined significantly by 52% to $2.95 billion.
  • 3Net realized capital losses were substantial at $18.31 billion, a significant increase from $864 million in the prior year's period.
  • 4Unrealized market valuation losses on AIGFP's super senior credit default swap portfolio amounted to $7.05 billion.
  • 5Total revenues decreased by 97% to $898 million.
  • 6AIG entered into an $85 billion revolving credit agreement with the Federal Reserve Bank of New York, with $63 billion outstanding at quarter-end.
  • 7Shareholders' equity decreased significantly from $95.8 billion at December 31, 2007, to $71.2 billion at September 30, 2008.

Frequently Asked Questions

AIG reported a substantial net loss of $24.47 billion for the three months ended September 30, 2008, a stark contrast to the net income of $3.09 billion in the same period of 2007. This loss was primarily driven by significant realized capital losses and unrealized valuation losses related to its AIG Financial Products segment's credit default swap portfolio.

The financial crisis led to severe liquidity pressures for AIG, exacerbated by rating agency downgrades. This resulted in AIG being unable to access traditional debt markets. To address this, AIG secured an $85 billion revolving credit facility from the Federal Reserve Bank of New York, with $63 billion drawn by the end of the quarter. The company is actively pursuing asset disposals and restructuring to improve its financial position.

All major segments experienced significant declines. General Insurance reported an operating loss of $2.56 billion, Life Insurance & Retirement Services had an operating loss of $15.33 billion, and Financial Services incurred an operating loss of $8.20 billion. The Asset Management segment also reported an operating loss of $1.14 billion.

The $85 billion revolving credit facility from the Federal Reserve Bank of New York was critical for AIG's liquidity during this period of severe market dislocation. It provided essential funding to meet AIG's obligations and stabilize its operations, though it also introduced new terms and covenants for the company.