AIG Uses Dividend & Capital Raise To Mask Horrible Losses (AIG)

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American International Group (NYSE: AIG) showed a wider-than-expected loss for the quarter.  More importantly, it plans to raise more than $7 billion to buttress its balance sheet.

Its net loss was -$3.09 per share, ugly when compared with net income of $1.68  EPS for Q1 2007.  Its revenues tanked by 54% to $14.03 billion in the quarter.  First Call had estimates of $-$0.76, but there was a very wide band of estimates with some calling for wider losses.  That earnings number may not be the clean number, but th rest of the data is what is actually more important any how.

Estimates for the company varied widely, ranging from a loss of $2.32 a share to a profit of 97 cents a share.

It lost roughly $9.1 billion in credit-default swaps, which promise to cover losses on $579 billion in bonds or other debt instruments.

The company is also boosting its cash dividend by 10% to $0.22 per share.  Note from 24/7 Wall St.: "Dear financial company… you are supposed to cut temporarily your dividend when times are tough to keep your ratings."

The company will also sell some $7.5 Billion in common stock and equity units to bolster its books in a sale via Citi and JPMorgan.  Another offering may or will take this up to a total $12.5 Billion in raised capital.

Shares are down by 8% at $40.55 in after-hours trading.  One thing is for sure.  Methuselah is going to be raising hell there soon.

Jon C. Ogg
May 8, 2008