Last Updated: 29/02/2008  08:48

AIG reports $5.3 billion quarter loss

American International Group (AIG) lost more than $5 billion in the fourth quarter as bad credit ate into its investments, it said last night.

The insurer lost $5.29 billion, or $2.08 per share, in the fourth quarter, compared with profit of $3.44 billion, or $1.31 per share, in the fourth quarter of 2006.

For all of 2007, AIG earned $6.2 billion, or $2.39 per share, compared with $14.05 billion, or $5.36 per share, in 2006.

AIG, the largest insurer in the United States, has been thrust to the forefront of the credit crisis gripping financial markets by contracts known as credit default swaps.

AIG's swap portfolio lost $11.12 billion in value during the fourth quarter because decaying credit quality means the insured debt is less likely to be repaid. AIG also lost more than $3 billion in its investment portfolio because of 'significant, rapid declines' in the value of mortgage debt.

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