American International Group Inc. has included a blunt warning about recent market turmoil in the documents announcing its new securities offerings.
AIG, New York, hopes to compensate for the effects of the credit market upheaval on its finances by raising $5.3 billion through the sale of equity units, $7.4 billion through the sale of common stock, and as much as $5 billion more through the sale of “high equity content fixed income securities.”
AIG recently announced that its financial services operations, which include the mortgage, commercial finance, leasing and capital markets units, posted $8.5 billion in operating losses during the first quarter as a result of unrealized market valuation losses related to the credit default swap portfolio at the company’s AIG Financial Products unit.
But AIG also attributed $4.4 billion in net realized capital losses to its life insurance and retirement services operations.
In the equity unit offering prospectus, AIG notes that disruption in the U.S. residential mortgage and credit markets had a significant adverse effect on the life and retirement operating results.