AIG Reports Record Loss As US Rescues Insurer Again

American International Group posted a $61.7 billion quarterly loss, the biggest in corporate history, and reached a new government bailout deal after officials concluded the insurer was too big to be allowed to fail.

AIG , which got $150 billion of taxpayer aid last year, will get access to up to $30 billion of new government capital.

The new bailout avoids for now any crippling credit rating downgrades that could force AIG to come up with billions of dollars that it might not have.

"Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high," the U.S. Treasury Department and the Federal Reserve said in a joint statement.

AIG, which operates in more than 130 countries, was once the world's largest insurer by market value. Its shares are now worth about 50 cents each.

The quarterly loss, AIG's fifth in a row, equaled $22.95 per share, and compared with a year-earlier loss of $5.29 billion, or $2.08 per share. The latest quarterly loss equaled about $670.2 million per day, or $7,757 per second.

For all of 2008, AIG lost $99.29 billion, wiping out profit dating back to the early 1990s.

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Major credit rating agencies left AIG's medium investment-grade ratings alone after news of the loss and the new rescue package.

Moody's Investors Service analyst Bruce Ballentine said he expected the government "will provide incremental support as needed to ensure that AIG can meet its obligations through this period of severe economic recession and market turmoil."

The new bailout gives AIG more lenient terms on existing financing, and will give the government a preferred-share stake in two life insurance businesses.

AIG also announced plans to spin off part of its property-casualty business, to be renamed AIU Holdings.

The revamped rescue package is the third since last fall when the government stepped in to bail out AIG.

The Fed and the Treasury said AIG, which has counterparties around the globe, was so important to the U.S. economy and financial system that it needed more help.

"This will take time and possibly further government support if markets do not stabilize and improve," they said in a statement.

In an interview on NBC's "Today" show Monday morning, AIG chairman and chief executive Edward Liddy said: "We're going to be able to pay back the Federal Reserve. The new $30 billion is a stand-by line. It's not necessarily something that we think we'll have to draw on right away."

Problems at AIG did not come from its traditional insurance operations, but instead from its financial services units, and primarily its business insuring mortgage-backed securities and other risky debt against default.

"Our insurance policy holders, they're in good shape. They're secure, they're protected," Liddy said in the "Today" show interview. "It's all the other ancillary businesses that are causing this. And it's the decline in asset values around the globe."

The latest results include $7.2 billion in unrealized losses and credit valuation adjustments at AIG Financial Products, the source of credit-default swaps, and pretax losses of $21.6 billion tied to the declining value of AIG's investment portfolio.

AIG's general insurance business swung to a loss on $2.8 billion in net realized capital losses.

General insurance net premiums dropped 16.3 percent to $9.2 billion, and net premiums earned fell 5.9 percent to nearly $11 billion.

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