AIG’s $20 billion fundraising shock

by Gill Montia

Story link: AIG’s $20 billion fundraising shock

American International Group (AIG), the world’s biggest insurer, saw its shares plunge to their lowest level in a decade yesterday as it revealed the need for larger than expected fund raising.

The group posted a $7.81 billion net loss in the first quarter of 2008, after writing down $13.1 billion in relation to sub-prime and other investment losses.

The group is now in the process of raising $20 billion through the sale of equity and debt issues.

The size of the fund raising has surprised some analysts who expected the insurer to suspend its annual dividend in preference to raising capital on this scale.

According to AIG chief executive, Martin Sullivan, the 60% increase in the group’s capital raising plans will provide support for future growth, particularly its aircraft leasing, foreign life and retirement divisions.

It will also provide a buffer for any further ramifications of the credit crisis.

AIG also plans to offset some of its losses through the sale of non-core businesses.

In related news, the US Securities and Exchange Commission has warned Maurice Greenberg, AIG’s former chief executive, that he may face civil charges in relation to alleged fraudulent reinsurance transactions dating from 2000.