Hugh Son
February 26th, 2010

American International Group Inc. posted a wider-than-expected loss after setting aside more reserves for insurance claims and paying down bailout debts. The shares fell 8.5 percent in New York trading.

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The fourth-quarter net loss of $8.87 billion, or $65.51 a share, narrowed from $61.7 billion, or $458.99, a year earlier when AIG recorded the biggest loss in U.S. corporate history, the New York-based firm said today. Results included $6.7 billion in charges fueled by paying down AIG’s Federal Reserve credit line. It cost AIG $1.8 billion to add to property- casualty reserves as sales in the division slipped 2.2 percent.

“The reserve boost is a little red flag, as the industry is seeing largely favorable trends in reserve development,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago. “It was a messy quarter, and overall it shows you how deep a hole they’ve dug, and how hard it is for them to dig out.”

Chief Executive Officer Robert Benmosche, 65, appointed in August, must increase insurance profits to repay loans in AIG’s $182.3 billion bailout. Benmosche, who has told staff that AIG was “too big,” is also divesting two of the company’s largest non-U.S. life insurance divisions to reduce the firm’s draw on a Federal Reserve credit line by $25 billion.

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