AIG Disclosure In Filings Hammers Stock (AIG)

American International Group, Inc. (NYSE: AIG) is spooking the financial markets over what is once again another point of the markets not being able to price anything in.  AIG in an SEC Filing this morning disclosed that it should clarify and expand upon its prior disclosures relating to its methodology and data inputs used to determine the fair values of the super senior credit default swap portfolio in respect of multi-sector collateralized debt obligations.  247WallSt.com’s translation: "We are expanding valuation to include a ‘mark to concept’ because there is no real market for CDO’s."

AIG also provided a table showing the net value write-downs from September 30 to November 30.  In September these write-downs were $352 million, and in November these write-downs were listed as $5.964 Billion.  AIG similarly noted that it has not yet determined the amount of declines in fair value of AIGFP’s super senior credit default swap portfolio to be included in its December 31, 2007 financial statements.  PricewaterhouseCoopers is its independent auditor and it has concluded that AIG "had a material weakness in its internal control over financial reporting and oversight relating to the fair value valuation of the AIGFP super senior credit default swap portfolio."

AIG shares are down some 10% at $45.20 and has traded as low as $44.75 earlier today.  With a 52-week trading range of $49.40 to $72.97 before today, that makes for a new 52-week low. 

The beatings will continue until disclosure improves.  These negative headlines are nowhere from being over in the financial sector.  At some point these will be factored into prices, but as of this morning that isn’t the case.

Jon C. Ogg
February 11, 2008