American International Group (AIG) share price tumbles

The largest investment insurance company of the world, US based American International Group (AIG) seems to be following the path of investment banks. The share price was down 52% in the opening hours of the trading session on Monday 15th September 2008. Questions were raised about its capital base when the Fortune 18th company requested Federal Reserve for $40 billion in bridge financing to help come out of liquidity crisis and ratings downgrades.

The shares tumbled to a low of $5.82 from the Friday’s close of $12.14. It lost more than 80% from the peeks at the beginning of the year. The company had been reporting losses from the past three quarters. The company reported $18 bn loss in the past few quarters. The loss was mainly from the mortgage derivatives business of the company. The stock meltdown started on Friday when Standard and Poor (S&P, a credit rating agency in US) put the company’s credit rating on negative watch. S&P stood on same lines for Lehman Brothers before it filed for bankruptcy.

The company is selling off it’s valuable assets to compensate for the mortgage losses. AIG does business in more than 130 countries and has a huge customer base across the world.  The company’s Financial Product business holds Credit Default Swap wing which earned biggest losses.

 

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September 15, 2008 | Filed Under Market Analysis 

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