AIG shares tank following big fourth-quarter loss

Peter Hancock, chief executive officer of American International Group, speaks during an interview on the floor of the New York Stock Exchange.

Michael Nagle | Bloomberg | Getty Images

Shares of American International Group dropped 9 percent Wednesday after the insurance giant reported a huge quarterly loss.

The company reported a fourth-quarter loss of $2.96 per share after the company took a $5.6 billion charge from a prior year adverse reserve development.

CEO Peter Hancock told CNBC's "Closing Bell" on Tuesday said the charge needs to be looked at together with the "very substantial" reinsurance transaction it recently undertook with Berkshire Hathaway.

The company agreed to pay Berkshire about $10.2 billion last month to take on some long-term risks on U.S. commercial insurance policies already written by AIG.

Analysts at Sandler O'Neill + Partners said in a Wednesday note that, excluding the $5.6 billion charge, the company posted a profit of 62 cents, still below its expected earnings per share of $1.14.

They also said: "AIG changed its segment reporting enough that much of our earnings model is not comparable with its fourth quarter reported results. … All segments have been restated such that no historical segment data is comparable."

Disclosure: Sandler O'Neill has received compensation from American International Group, Inc. for investment banking services in the past 12 months.